4th October 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

POSSIBLE CAPITAL GAINS TAX CHANGES IN THE OCTOBER BUDGET
Many commentators are suggesting that the rate of CGT might be aligned with the rates of income tax, a return to the regime that applied when Gordon Brown was chancellor. Rachel Reeves is known to be a disciple of Gordon, so maybe we will see a return to taper relief as well! One would hope that Business Asset Disposal Relief (BADR), or something similar, is retained to encourage entrepreneurship and growth. She might even reintroduce Business Asset Taper, one of Gordon’s ideas, to reduce the effective CGT rate to 10% after 10 years’ ownership? If some form of CGT relief to encourage entrepreneurs is retained then maybe the conditions for obtaining the relief will be tightened still further?
 
Other possible changes to CGT to listen out for include further restrictions to private residence relief and changes to hold over relief for transfers into and out of trust. A more controversial change would be the removal of the CGT free uplift to probate value on death, with beneficiaries inheriting the deceased’s CGT base cost of their assets, as suggested by the now abolished Office of Tax Simplification (OTS).
 
SHOULD WE BRING FORWARD ASSET DISPOSALS BEFORE BUDGET DAY?
CGT changes normally take effect from 6 April, but there have been mid-year changes in the past. This possibility has caused many taxpayers to bring forward disposals to take advantage of the current rates. The disposal date for CGT is the date of unconditional exchange of contracts and there is likely to be anti-forestalling legislation to counteract attempts to artificially bring forward the disposal date. There is still time to sell listed investments before 30 October but other assets such as a business or property typically take a lot longer to sell unless a buyer is already lined up.
 
BEWARE “BED AND BREAKFAST” ANTI-AVOIDANCE
Many investors may be looking to realise capital gains on their investments at the current rates, just in case there is an increase with effect from 30 October 2024.  They may then wish to repurchase those investments after the change in rates to retain the balance of investments in their portfolio.  Where the same shares and securities are bought back within 30 days of the date of disposal, the shares bought back would be matched with those sold and the desired capital gain and increase in base cost may be negated.

For example, if 1000 shares in A plc were bought for £2 a share several years ago and are sold on 29 October 2024 for £4.50 a share there would be an apparent £2,500 capital gain, potentially tax free if the £3,000 2024/25 CGT annual exemption is unused. However, if the same class of shares in A plc are purchased on say 5 November 2024 for £4.45 a share there would be a £50 capital loss instead of the desired capital gain and the base cost would remain at £2 a share. This is because the repurchase is within 30 days.
 
An alternative strategy would be for the taxpayer’s spouse to repurchase the shares (“bed and spousing”) or to repurchase the shares in the taxpayer’s ISA or pension fund.
 
RUMOURS OF PENSION CHANGES IN THE OCTOBER BUDGET
Changes to pension tax relief seems to be top of the list of possible changes in the Budget and could yield more tax revenues than changes to CGT and IHT combined. As recently as 6 April 2023, we saw the abolition of the lifetime allowance charge and a significant increase in the pension annual allowance to £60,000 a year, which Rachel Reeves commented were too generous, so we may see those changes reversed or curtailed.
 
Possible changes to pensions to listen out for include: 

• Limiting pension tax relief for individuals to basic rate or possibly a 30% flat rate;
• Further limiting (or abolishing) the 25% tax free lump sum;
• Freezing or reducing the £1,073,100 lump sum and death benefit allowance;
• Making the undrawn pension fund subject to inheritance tax; and
• Limiting the amount of employer pension contributions that can be paid by way of a salary sacrifice. 

Pension changes normally take effect from the start of the tax year on 6 April, however there have been mid-year changes in the past. Taxpayers should therefore consider bringing forward pension planning just in case changes are effective from the date of the announcement.
 
MANY OVER 55’S CAN WITHDRAW 25% OF THEIR PENSION FUND TAX-FREE
Under current pension rules, many pension funds allow pension scheme members to withdraw up to 25% of their pension savings tax-free. Finance Act 2023 limited the tax-free amount to £268,275 unless the individual had applied for protection at a higher amount. There are rumours that the tax-free amount may be further limited, with an amount of £100,000 suggested, and this has resulted in significant withdrawals from pension funds in recent weeks. It should be noted that there are anti-avoidance rules that limit the amount that can be reinvested in the pension fund within a 12 month period.
 
Pension lump sum “recycling” is countered by anti-avoidance rules where the lump sum withdrawn is more than £7,500 during a one year period and subsequent pension contributions are increased by more than 30% of the lump sum.  A breach of this rule will mean that the lump sum is an unauthorised payment and will be taxed at 40%.
 
CHECK YOUR STATE PENSION ENTITLEMENT
The current State Pension is £11,502 and is due to rise to around £12,000 a year for 2025/26. At current annuity rates it would cost over £300,000 to receive an index-linked annuity starting at £12,000 a year, so it’s important to maximise your entitlement.
 
In order to receive a full State Pension you need 35 qualifying years, but is it worth topping up voluntary Class 3 National Insurance contributions in respect of missing years? This is a financial decision but there is a short breakeven period. It is around 3 years for employees and even shorter for the self-employed who can pay Class 2 contributions for missing years. You can also get credit for missing years if you were not working because of bringing up children.
 
Employees need to make Class 3 contributions of £824.20 or £907.40 a year for extra years which yields £302.86 a year in additional annual state pension.  Self-employed individuals can pay Class 2 contributions at the rate of £179.40 for each missing year to yield £302.86 per annum.
 
Normally you can only go back six years to make up missing contributions but there is currently an opportunity to fill up missing years going back to 2006/07 – note that the deadline for the extended carry back is 5 April 2025.  
 
“NUDGE” LETTERS BEING SENT BY HMRC TO TAXPAYERS
HMRC have recently increased their use of “one to many” or “nudge” letters to taxpayers which suggest that there may be errors or omissions in tax returns or accounts information.  HMRC argue that these letters are a key tool in their compliance strategy but this is essentially a “fishing” expedition more akin to direct mailing and this may alarm many taxpayers who are completely innocent.  Please get in touch with us if you receive such a letter and we can deal with the matter on your behalf.
 
BEWARE “SCAM” LETTERS CLAIMING TO BE FROM HMRC
We have also become aware of scam letters and emails purporting to be from HMRC being sent to taxpayers. These letters request important personal information which would be needed by fraudsters to access your data. If you have doubts about whether a communication from HMRC is genuine, please contact us and we will check its authenticity.

27th September 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

Government cracks down on late payments: what you need to know and how to protect your business now
Late payments are a huge headache for small businesses across the UK, costing SMEs around £22,000 per year on average. In fact, it’s estimated that they’re responsible for about 50,000 business closures each year!

The government has just announced new measures to tackle the problem, but these won’t come into play overnight, so what can you do in the meantime to protect your business?

What’s changing?
The government has rolled out some new proposals to address late payment problems, particularly trying to tackle larger businesses taking advantage of smaller ones. Here’s what’s on the table:

• New Fair Payment Code: The old Prompt Payment Code will be replaced with a new Fair Payment Code this autumn, setting clearer standards for businesses to meet. Businesses that show they pay their suppliers promptly can earn gold, silver, or bronze status, encouraging faster payments across the board. 
• More transparency about big company practices: New legislation will soon require large businesses to report their payment practices in their annual reports. This will shine a light on companies that drag their feet on paying small suppliers, holding them accountable to boards and investors. 
• Consultation on tougher laws: Consultation will be held on stronger laws to force big companies to pay small businesses on time. Enforcement of existing laws is also being ramped up, meaning companies that don’t comply with reporting regulations could face criminal penalties, including unlimited fines.

This matters to small businesses
According to the Federation of Small Businesses (FSB), more than half of UK SMEs are affected by late payments every quarter, with many forced to take out expensive loans or dip into personal savings to cover cash flow gaps. This new government focus on the issue aims to level the playing field and remove a major barrier to SME growth.

Of course, it’s hard to say exactly how effective the new measures will be, and it will take time for them to be fully implemented. So, what can you do to tackle late payments in your business today?

Practical steps to handle late payments right now
While the government’s efforts to fix the late payment culture are welcome, here are a few practical steps you can take immediately to protect your business:

• Be proactive with your payment terms: Make sure your payment terms are crystal clear right from the start. Include these in your contracts and invoices, and consider tightening your payment deadlines if you’ve been giving clients too much leeway. For example, moving from 60 to 30-day terms can help speed things up.
  
• Chase payments early and regularly: Don’t wait until an invoice is overdue to follow up. Send polite reminders a week before the due date, and chase them promptly if payment is late. Many businesses find that consistent, friendly follow-ups can make a big difference in getting paid faster. 
• Offer incentives for early payment: Consider offering a small discount for clients who pay early. While this might reduce your profit slightly, it’s often worth it to avoid the costs and stress of late payments.
• Use electronic invoicing and payment systems: Research shows that electronic invoicing can reduce late payments by up to 20%. Switching to digital invoicing and payment systems can streamline the process, making it easier for your clients to pay on time and for you to track payments more efficiently. 
• Consider factoring or invoice financing: If late payments are seriously hurting your cash flow, you could look into invoice financing or factoring services. These allow you to borrow against your unpaid invoices, giving you the cash you need upfront. Just be aware that these services come at a cost, so weigh the pros and cons carefully. 
• Build strong relationships with clients: It’s easy to overlook, but maintaining a strong relationship with your clients can sometimes help avoid late payments. Regular check-ins and open communication about the status of payments can prevent issues before they arise.

Looking ahead
Hopefully the new Fair Payment Code and the related legislation around reporting will put more pressure on big businesses to pay smaller ones on time. However, even if effective, these changes will take time to filter through.

In the meantime, taking a proactive approach to invoicing, payments, and customer relationships now will continue to help protect your business and reduce the impact of late payments.

If late payments are causing you major issues or you’re unsure how to handle overdue invoices, get in touch with us for advice tailored to your business. We’re here to help you stay on top of your finances and keep your business growing.

See: https://www.gov.uk/government/news/crack-down-on-late-payments-in-major-support-package-for-small-businesses
 
Chancellor’s speech takes optimistic tone on economy
The Chancellor, Rachel Reeves, gave an important speech at the Labour Party conference last week, in which she appeared to shift tone to speak more positively about the economy.

Recently she spoke about the upcoming Budget being a “painful” one. As a result, there has been speculation on where spending will be cut and tax raised, which may have affected consumer confidence.

However, the Chancellor’s speech at the party conference concentrated on the positive results she expects to bring to the economy. She plans to grow public spending in real terms as she believes that investment by the government will help the economy to grow. There may be changes upcoming to the rules on government borrowing so that more investment is allowed.

Whether this means that the Budget will not be as painful as we might have been expecting is hard to know. As always, we will keep you posted on the Budget developments.

See: https://www.bbc.co.uk/news/articles/c5y50z5l1r2o
 
Chancellor pushes for e-invoicing: What you need to know
The Chancellor unveiled a series of announcements last week that could have implications for UK businesses. One of the most relevant for business owners was the government's push for electronic invoicing (e-invoicing).

HM Revenue and Customs (HMRC) will soon launch a consultation on encouraging the wider use of e-invoicing, with the goal of simplifying business transactions and reducing administrative burdens but perhaps especially, reducing errors in tax returns so that HMRC can ‘close the tax gap’.

While there are clearly advantages for HMRC in businesses using e-invoices, it’s also fair to say that they can benefit businesses too.

Benefits of e-invoicing for businesses:

• Improved cash flow: E-invoicing accelerates payment times by automating the invoice approval process, making it easier for businesses to receive payments quickly. 
• Reduced errors: Automated processes can help minimise the risks of manual entry errors in invoices, which can lead to payment delays or disputes. 
• Increased productivity: With fewer administrative tasks, businesses can save time and focus on other essential areas, such as growth and customer service. 
• Tax compliance: E-invoicing can help businesses keep accurate tax records, making it easier to complete tax returns and avoid discrepancies that may lead to penalties.

How could you take advantage of e-invoicing?
While the consultation is yet to launch, there’s no reason you couldn’t give some thought to moving over to an e-invoicing system now.
To do this, you could explore the options available. Many software providers offer affordable solutions tailored to SMEs that work with your existing accounting software. You may find that the software you already use can do e-invoicing for you.

If you need any help with e-invoicing or setting up your accounting software, please just give us a call and we would be happy to help you out.
See: https://www.gov.uk/government/news/chancellor-unveils-package-to-deliver-on-promises-of-new-government
 
HMRC reform: digital transformation and closing the tax gap
In line with the e-invoicing initiative we reported on elsewhere, the Chancellor also outlined broader reforms to modernise HMRC through a Digital Transformation Roadmap, which is expected in Spring 2025.

This roadmap will aim to create a “digital-first” tax system, although it will include measures to ensure support for those unable to go fully digital.
In addition, James Murray, who is Exchequer Secretary to the Treasury and is responsible for the UK’s tax system, has been appointed as the Chair of the HMRC Board. This in part is to help him oversee how HMRC can ‘close the tax gap’ – in other words, collect tax that the government currently believes is being underpaid.

HMRC has a target of recruiting an additional 5,000 compliance staff to help it in these aims.

How businesses might be impacted:
With HMRC focusing on closing the tax gap, businesses should ensure that their tax affairs are in order. You might consider seeking advice to review your tax compliance processes and make sure you avoid potential penalties.

For most businesses, operating digitally is now a day-to-day norm. However, with HMRC moving to a “digital-first” approach, if you’ve been relying on paper-based or old computer systems, it may be time to think about upgrading to online solutions.

If you’re unsure how these changes might affect your business or need support with your tax compliance or digital strategy, please get in touch. We’re here to help you navigate the upcoming reforms and ensure your business is well-positioned for growth.

See: https://www.gov.uk/government/news/chancellor-unveils-package-to-deliver-on-promises-of-new-government
 
New apprenticeship reforms: What they mean for your business
The government has announced some reforms to the apprenticeship system in England, which could bring some exciting opportunities for business owners. These reforms, aimed at boosting young people’s access to apprenticeships, come with a new "growth and skills levy" that will replace the existing apprenticeship levy.

Here’s what you need to know, and how this could benefit your business.

Understanding the new growth and skills levy
This new levy is designed to give businesses more flexibility when it comes to taking on and training new apprentices. Under the current system, apprenticeships have to last at least 12 months, which may not always suit your business needs.

Under the new system, funding for shorter apprenticeships will be possible. This flexibility means you’ll be able to offer training programmes that suit both the needs of your business and the learning speed of your staff. This may mean being able to get new staff members up and running quicker, while still providing them with valuable skills training.

New foundation apprenticeships
Another key part of the reforms is the introduction of "foundation apprenticeships." These new apprenticeships are aimed at giving young people a better start in certain critical sectors so that they can earn a wage while developing skills at the same time.

The goal of the reforms is clearly to encourage employers to invest more in younger workers. Young people can be highly motivated and eager to learn, and with government support for their training, this could be a good resource for your business.

What does this mean for your existing apprenticeship plans?
To raise the funds required under the new system, employers will be asked to rebalance their apprenticeship funding and invest in younger workers. Businesses will need to fund more of their level 7 apprenticeships (those at the master’s degree level) outside of the levy. These high-level apprenticeships are typically accessed by older or already well-qualified employees.

If you rely on level 7 apprenticeships in your business, it’s worth looking ahead and planning how you might adjust your budget to cover more of these costs yourself.

What does Skills England’s report mean for you?

Skills England has also published its first report, which highlights the skills gaps currently facing the UK economy. According to the report, employer investment in training has declined over the past decade. Investment per employee is down by 19% in real terms since 2011.

The report also shows that 1 in 10 jobs are now in "critical demand" with more than 90% of these jobs requiring training or education.
This report could act as a wake-up call for many businesses. With fewer people investing in training, those who do could gain a clear advantage in filling critical roles. By taking advantage of these new apprenticeship reforms, you could be ahead of the curve, helping your business secure the skilled workers it needs for long-term success.

In summary: key takeaways for your business

• The new growth and skills levy offers more flexibility, allowing you to take on apprentices for shorter periods, tailored to your business’s needs. 
• Foundation apprenticeships could help businesses access a pipeline of young talent. 
• The funding for high-level apprenticeships (level 7) will shift more towards employers, so plan ahead if this is relevant to your business. 
• The Skills England report highlights massive skills gaps across many industries – by investing in apprenticeships now, your business could secure a competitive edge.

With these changes on the horizon, it’s worth keeping an eye on further announcements from the Department for Education for specific details on how the new system will work. But in the meantime, if you’re looking to grow your team or upskill your workforce, these apprenticeship reforms could be the perfect opportunity to get started.

See: https://www.gov.uk/government/news/prime-minister-overhauls-apprenticeships-to-support-opportunity
 
Have a Child Trust Fund? Time to check if you can claim your savings!
If you, or your child, was born between 1 September 2002 and 2 January 2011, there could be a savings account with your or their name on it – literally!
More than 670,000 young people, aged 18-22, have yet to claim their Child Trust Fund, with HM Revenue & Customs calculating that the average fund is worth £2,212. That’s a decent chunk of money, so it’s worth checking to see if you’re one of those with unclaimed funds.

Let’s look at how you can find out if you or someone in your family are owed this cash, and what steps you need to take.

What is a Child Trust Fund?
Child Trust Funds are tax-free savings accounts that were set up for every child born between 1 September 2002 and 2 January 2011. The government kickstarted each account with a £250 deposit, and in some cases, parents may have topped this up over the years. Once the child turned 18, the account matured, meaning that the funds can be withdrawn or reinvested.

The key thing to note is that these accounts aren’t held by the government but are managed by banks, building societies, or other savings providers. So, while the money is there, it’s not automatically sent to the account holder—you’ll need to take action to claim it.

How do you find your Child Trust Fund?
If you already know which provider holds the Child Trust Fund, then you can simply contact them directly and start the process to withdraw or reinvest your savings.

But what if you don’t know where your fund is? No problem. There’s a handy online tool on GOV.UK that can help you find your Child Trust Fund provider. All you need is your National Insurance number and your date of birth. If you’re unsure of your National Insurance number, you can easily find it using the HMRC app.

If you’re not sure whether you or your child have a Child Trust Fund or how much it’s worth, the best thing to do is do a quick check. You won’t lose anything by checking and you may get a nice surprise of discovering some extra savings for you or your family member.

If you need any help at all navigating the process, please feel free to get in touch – we’re always happy to help!

See: https://www.gov.uk/government/news/671000-young-people-urged-to-cash-in-their-government-savings-pot 
 
Increase in warmth standards for rented homes
The government has announced new measures designed to improve the warmth of homes for renters and lower heating costs.

As things currently stand, a private rented home can be rented out if it meets Energy Performance Certificate (EPC) E. Social rented homes have no minimum standard at all.

A consultation will shortly be launched on proposals for both private and social rented homes to have to meet EPC C or its equivalent by 2030.
Also announced was a new Warm Homes: Local Grant that will help low-income homeowners and private tenants to be able to make necessary energy performance upgrades to their home.

No dates have been announced as to when these measures will take effect, but if you are a landlord of a private rented home it may be worth you monitoring the consultation when it’s launched so that you can have your say. It may also be prudent to consider what investment you may need to make if you need to make improvements to your property.

See: https://www.gov.uk/government/news/home-upgrade-revolution-as-renters-set-for-warmer-homes-and-cheaper-bills

20th September 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

Amazon ends hybrid work policy: Is it time to reconsider remote working?
Amazon has announced the end of its hybrid work policy, with corporate staff expected to be back in the office five days a week starting in January.

Previously, staff had the flexibility to work from home two days a week.

The decision has apparently been made to help staff work together more effectively and help reduce bureaucracy. Last year, Amazon tightened the full remote work allowance that had been put in place during the pandemic and this resulted in staff staging a protest. The new decision is unlikely to be popular with many.

Amazon’s decision is in contrast with the new UK employment rights bill expected to be published next month. This is expected to make flexible working a default right from day one.

What do you think? Is it time to reconsider remote working? Let’s look at some of the pros and cons.

The pros of remote working

• Increased Productivity: Many employees argue that working from home boosts productivity because of there being fewer interruptions when compared to office environments. 
• Wider Talent Pool: Flexible work policies enable businesses to recruit from a larger and more diverse pool of talent. For instance, a business can hire staff living in various areas of the country allowing them to tap into a broader or more specialist range of skills. 
• Cost Savings: Remote working can reduce overheads for businesses, including office rent, utilities, and other operational costs. This financial flexibility can be particularly beneficial for smaller firms.

The cons of remote working

• Collaboration Challenges: In communicating the decision, Amazon’s CEO highlighted that in-person work fosters better collaboration and innovation. The informal discussions and spontaneous idea-sharing that occur in an office environment are often harder to replicate in a virtual setting. This can hinder teamwork and slow down decision-making processes, especially in large businesses.
• Cultural Dilution: Remote working could dilute the culture of the business. Maintaining a strong sense of shared mission and values can be more challenging when employees are spread out and not regularly engaging face-to-face. 
• Potential for Bureaucracy: Amazon have linked remote work with a growing number of bureaucratic layers in their business, that slows down their business. Businesses that thrive on agility and quick decision-making may find that remote working introduces inefficiencies.

Implications for your business
The debate around remote working remains complex. You may benefit from the flexibility and productivity gains that homeworking can provide. However, if your business relies on close collaboration, you may find that bringing staff back to the office offers greater advantages.

As businesses navigate these decisions, it’s clear that there is no one-size-fits-all solution. The key will be to balance productivity, collaboration, and employee satisfaction so that you achieve the best results for your needs.

See: https://www.bbc.co.uk/news/articles/czj99ln72k9o
 
Inflation holds steady in August
The latest figures released by the Office for National Statistics last week show that inflation for the year to August 2024 remained steady at 2.2%.

Increases in air fares compared to last year made the biggest upward contribution to the rate. However, falls in the price of motor fuels and restaurants and hotels offset this.

The Bank of England met Thursday to review the base rate and decided to hold the rate at 5%. While inflation is slightly above the Bank’s target, this is in line with their expectations of an increase towards the end of the year before it falls again next year, and the Bank’s policymakers felt there was currently no need to make a further change.

If you need any help with reviewing your finance arrangements to make sure that you are paying the least possible, please give us a call. We’d be happy to help you!

See: https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/latest
 
Procurement Act 2023: Implementation delayed to February 2025
The government has announced a delay to the start of the Procurement Act 2023, moving the commencement date to February 2025.

The Procurement Act aims to simplify and improve transparency in public sector procurement and open opportunities for small businesses.

While the Act’s goals remain unchanged, the government has decided to develop a new National Procurement Policy Statement before the Act comes into force. In short, Labour don’t like the Policy Statement that the Conservatives previously wrote and want to write their own.

How could this affect businesses?
For businesses that had hoped to start capitalising on the simplified procurement processes promised by the Act, this is frustrating news. You may have wasted time and money on getting ready and opportunities for contracts being offered this autumn may now be more difficult.

On the other hand, the additional time may offer you an extended period to be able to adapt to the new requirements and opportunities. This could provide a chance to better prepare for the potential benefits of easier access to public contracts.

Whether or not the delay will mean that the revised framework offers more favourable conditions for businesses remains to be seen.

What’s next?
The government plans to withdraw the previous policy statement and start drafting new regulations to implement the Procurement Act on 24 February 2025.

This also involves working closely with the Welsh and Northern Irish governments to ensure a smooth roll-out across the UK.

For businesses, the key takeaway is to stay informed and prepared. The delay offers a window to get ready for the changes, ensuring that when the Act does come into force, you can take full advantage of the new opportunities it promises to deliver.

See: https://questions-statements.parliament.uk/written-statements/detail/2024-09-12/hcws90
 
Check your National Insurance record: Are you missing out on your full State Pension?
HM Revenue and Customs (HMRC) has recently reminded people to check and make sure they are not missing out on valuable State Pension entitlements due to gaps in their National Insurance (NI) record.

The issue mainly affects parents, particularly women, who claimed Child Benefit before 2000. During that time, Home Responsibilities Protection (HRP) was designed to reduce the number of NI qualifying years needed to receive the full basic State Pension. However, if you didn’t provide your NI number when claiming Child Benefit, your record may not reflect the HRP you were entitled to, potentially lowering the State Pension you will now receive.

Who should check?
If you claimed Child Benefit between 1978 and 2000, it’s worth checking if HRP was properly applied to your NI record, especially if you took time off work to raise a family. Although HMRC is writing to those affected, you don’t need to wait for a letter—you can check your NI record online or through the HMRC app.

If gaps are identified and you successfully claim HRP, your NI record will be corrected, and the Department for Work and Pensions (DWP) will recalculate your State Pension. This could result in higher payments or, in some cases, back payments.

How to check and claim
It takes about 15 minutes to check your record on GOV.UK. If you find any gaps, you can submit a claim online or by post. There’s no need to apply if you already receive the full State Pension or if your missing year is already counted as a qualifying year.

Why this matters
For those nearing, or at, State Pension age, these missing years could make a difference in retirement income. Taking a few minutes to check your records now could help ensure you receive the full pension you’ve earned.

If you need any help, please feel free to give us a call and we would be happy to help you. Don’t miss out on what’s rightfully yours!

See: https://www.gov.uk/government/news/check-youre-not-missing-state-pension-payments
 
Chancellor backs new taskforce to support female entrepreneurs
The Chancellor of the Exchequer, Rachel Reeves, has pledged her support to the Invest in Women Taskforce, a new initiative aimed at increasing funding for female-founded businesses. The Taskforce aims to create a £250 million investment pool, making it one of the largest of its kind worldwide.

This move follows the Rose Review, which highlighted a £250 billion economic boost if women started and scaled businesses at the same rate as men.

Despite women making up over half the UK’s population, they currently own only 21% of businesses.

Speaking about the initiative, the Chancellor commented that she doesn’t take her responsibility to be able to use her position to improve life for women across the UK lightly. She said that her focus is on addressing the gender pay gap, strengthening workplace rights, and investing in childcare.

The announcement coincides with International Equal Pay Day and is part of broader efforts, such as the Investing in Women Code, to address the financial barriers female entrepreneurs face.

For women business owners or those looking to start, the Taskforce could lead to more opportunities for investment and growth, as the government seeks to encourage more equal representation in entrepreneurship.

See: https://www.gov.uk/government/news/chancellor-everyone-can-do-something-for-womens-equality
 
Government to unveil new plans to tackle youth unemployment and long-term sickness
The government has announced plans to address the rising number of young people out of work due to long-term sickness. There has been a 29% increase in sickness amongst 16-24 year olds since the pandemic. Government statistics indicate that nearly 900,000 young people are now not in education, employment, or training (NEET). This raises concerns, not just for their well-being, but also about the future workforce.

Minister for Employment, Alison McGovern, has pledged a fundamental shift in employment policies with the upcoming Get Britain Working White Paper. The government aims to create a system that focuses less on welfare and more on employment, offering more support to help people into work.

What does this mean for businesses?
For business owners, this could be good news. Many sectors are struggling to fill vacancies, with the Minister acknowledging that businesses are "crying out for staff" while large numbers of young people remain unemployed.

Key proposals outlined include:

• A Youth Guarantee: A commitment to provide work, apprenticeships, or skills training for young people who need it. This could mean a larger pool of young, trained workers for businesses to hire from. 
• Overhaul of jobcentres: Jobcentres are expected to be revamped to better connect people with jobs and training opportunities, helping match the right candidates with the right roles. 
• Support for long-term sick: As part of a plan to reduce NHS waiting times, the government is aiming to help people who are long-term sick return to work, potentially expanding the available workforce.

A boost for the economy
This initiative is part of the government’s frequently stated mission for economic growth. The Prime Minister has said that he wants the UK to have the highest sustained growth in the G7.

For your business, especially if you are in an industry facing recruitment challenges, these measures could provide a much-needed boost in accessing workers.

See: https://www.gov.uk/government/news/lockdown-generation-consigned-to-the-scrapheap-will-get-life-changing-support-into-work-vows-minister--2

British Chamber of Commerce launches in Uganda
The British Chamber of Commerce has officially launched in Uganda, offering UK businesses new opportunities to expand into the region. The Chamber aims to strengthen trade links between the UK and Uganda by providing a range of services, including networking events, trade delegations, and business advocacy.

For UK businesses, this could be a valuable opportunity to explore new markets in Uganda, particularly in sectors like energy, agriculture, and infrastructure.
Membership of the Chamber of Commerce starts at $650 annually, with 3 tiers of membership. Members will have access to exclusive benefits such as connections to key government and private sector organisations, as well as invitations to trade-focused events.

For businesses looking to expand their reach and engage in Uganda's growing economy, this development could be a big help.

See: https://www.gov.uk/government/news/british-chamber-of-commerce-opens-office-in-uganda-to-promote-trade-investment
 
Could UK Export Finance help your business to grow?
Kiverco, a family-owned business from County Tyrone in Northern Ireland, has secured multi-million-pound contracts to export recycling machinery to Saudi Arabia with the support of UK Export Finance (UKEF). UKEF has provided a £350,000 export insurance package that will help Kiverco to install new plants in Saudi Arabia.

Kiverco designs and installs recycling plants that process and recover waste across various sectors, including construction, municipal waste, and dry mixed recyclables. With over 400 sites worldwide, the Dungannon-based company is well-positioned to meet rising demand in Saudi Arabia’s waste sector, which is pushing for more sustainable infrastructure development.

This news story highlights the role that UKEF can play in supporting businesses that are looking to expand their trade internationally. UKEF can support businesses to find the finance and insurance needed to grow their export trade.

If you need any advice on the tax implications of exporting or would like advice on obtaining finance, please just get in touch. We would be happy to help you.

See: https://www.gov.uk/government/news/uk-export-finance-helps-ni-recycling-firm-meet-demand-from-saudi-market

13th September 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

Do you need to register for self-assessment?
HM Revenue and Customs (HMRC) have issued a press release debunking some common myths about whether or not someone needs to register to complete a self-assessment tax return.

The basic requirement is that anyone who needs to complete a self-assessment return for the first time to cover the 2023-24 tax year, needs to tell HMRC by 5 October 2024.

Here are the myths and the realities highlighted by HMRC:

Myth: I don’t need to file a return because HMRC hasn’t been in touch.
The reality is that it is each taxpayer’s responsibility to determine whether or not they need to complete a tax return.

You may need to register and complete a tax return if you:

• have started to be self-employed and earned gross income of more than £1,000.
• earned below £1,000 but want to pay voluntary Class 2 National Insurance contributions to protect your pension and benefit entitlements.
• have become a new partner in a partnership.
• have received untaxed income above £2,500.
• need to pay the High Income Child Benefit Charge because you receive Child Benefit and you or your partner earned more than £50,000.

Myth: Tax has to be paid at the same time as the return is filed
The deadline for paying tax for the 2023-24 tax year is 31 January 2025. Tax can be paid any time before this date, it does not need to be paid at the same time the return is filed.

Myth: I don’t need to file a return because I don’t owe any tax
Tax returns need to be completed to claim tax refunds and to claim tax relief on business expenses, charitable donations, and pension contributions. A return also needs to be completed to be able to pay voluntary Class 2 National Insurance Contributions if you want to protect your pension and benefit entitlements.

Myth: HMRC won’t expect a return from me if I don’t need to file one
Taxpayers need to tell HMRC if they no longer need to file a tax return, perhaps because they’ve stopped being self-employed or stopped renting out a property. Especially if HMRC have sent you a notice to file a tax return they will expect one and keep reminding you and may charge a penalty if they don’t receive it.

If you think you don’t need to complete a return it is best to tell HMRC as soon as your circumstances change.

Myth: I have to file a tax return and pay tax on things I sold after clearing out the attic
Although there has been speculation on this, the tax rules are that selling old clothes, books, CDs and other personal items through online marketplaces do not trigger a requirement to file a return or pay income tax on the sales.

If you are not sure whether you need to file a tax return for the 2023-24 tax year, please just get in touch with us. We’ll be happy to let you know what you need to do and to contact HMRC on your behalf.

See: https://www.gov.uk/government/news/need-to-register-for-self-assessment-top-5-myths-debunked
 
October budget to be “painful”
The Prime Minister, Sir Keir Starmer, speaking from Downing Street last Tuesday, has said that the budget in October will be “painful” and the government would be making “big asks” of the country.

He said that the country would need to be prepared to “accept short-term pain for long-term good” and that those with the “broadest shoulders should bear the heavier burden”.

However, no details were given about what the measures would be, other than Sir Keir reiterated that national insurance, VAT and income tax would not go up.

What could change?
There are a number of areas of tax that may be increased, and these could include the following:

• Focus on tax thresholds: By freezing thresholds – the amount of money at which any tax starts to be paid – the government collects more tax as more people are caught by higher rates of tax as their wages rise. Income tax thresholds are already frozen until 2028 and this could be extended. 
• Increases in capital gains tax – Capital gains tax rates are lower than income tax rates, so the government may look to increase these.
• Reduce pension tax relief – Currently pension savers receive tax relief at the same rate as their income tax. However, there has been speculation that a flat rate of pension tax relief could be brought in and this would raise funds for the government. 
• Raise inheritance tax – The government could raise the rate of inheritance tax or remove some of the reliefs that are available.

If you are concerned about how the budget may affect your situation, please feel free to talk to us at any time and we would be happy to advise you. We will be monitoring the October 30th budget very closely and update you on all the changes!

See: https://www.bbc.co.uk/news/articles/clyn01p5npgo
 
Government crackdown on illegal employment: What business owners need to know
Last month, the Home Secretary, Yvette Cooper, announced a significant government crackdown on employers hiring migrants illegally.

Overview of the government's crackdown
From Sunday 18 to Saturday 24 August, Immigration Enforcement teams carried out a series of targeted visits to businesses suspected of employing illegal workers, with a particular focus on car washes. Over this intensive week of action, more than 275 premises were targeted. Of these, 135 businesses were issued notices for employing illegal workers, and 85 illegal workers were detained.

Potential consequences for non-compliant businesses
The penalties for employing illegal workers are severe. Businesses found in violation can face substantial financial penalties. The maximum civil penalty for employing illegal workers is £45,000 per worker for a first offence and £60,000 per worker for repeat violations.

Key takeaway for business owners
In view of the potential penalties, it’s vital you ensure that your business is fully compliant with all employment laws. This includes conducting the necessary right-to-work checks on all employees to ensure they have the legal right to work in the UK.

If you have any concerns or need advice, please get in touch with us. We will be happy to help you.

See: https://www.gov.uk/government/news/hundreds-of-rogue-employers-targeted-in-illegal-working-crackdown
 
Lessons from the Labour Party's reprimand on information requests
As a business owner or manager, it's important to respond promptly to information requests, especially when it comes to Subject Access Requests (SARs).

The recent reprimand issued to the Labour Party by the Information Commissioner’s Office (ICO) serves as a reminder of the legal obligations and potential consequences of failing to meet these requirements.

What happened?
The Labour Party was reprimanded by the Information Commissioner’s Office (ICO) for repeatedly failing to respond to SARs in a timely manner. SARs are requests from individuals asking an organisation to provide any personal information it holds about them and details on how it is being used.

Under data protection law, organizations must respond to these requests within one month, with a possible extension of up to two months for complex cases.

However, an investigation by the ICO found that the Labour Party had a significant backlog of SARs following a cyber-attack in October 2021. By November 2022, they had 352 outstanding SARs, 78% of which had not been responded to within the mandatory three-month timeframe. Alarmingly, over half of these requests were delayed by more than a year.

Moreover, a previously unmonitored ‘privacy inbox’ was discovered, containing approximately 646 additional SARs and 597 requests for personal information to be deleted. None of these requests had been addressed.

What can you do?
While the number of information requests received by most businesses are likely to be much less than the Labour Party, you still need to be careful about responding to requests in a timely way.

To do that you could consider:

• Writing down clear processes for handling SARs and making all staff aware of these procedures and the importance of timely responses.
• Deciding whose responsibility it is to monitor and handle SARs, and making sure they have the resources available to handle the task.
• Regularly monitoring all communication channels, such as designated email addresses, to your business where a SAR might be submitted.
• Regularly reviewing the ICO’s guidance on SARs so that your business stays informed about legal requirements and best practices.

The reprimand issued to the Labour Party by the ICO serves as a good reminder of the importance of responding to SARs in a timely manner. As a business, failing to comply with these requirements can result in legal consequences, damage to your reputation, and a loss of trust among your customers and the public.

By making sure you implement procedures to deal with SARs, you can avoid these risks and demonstrate your commitment to data protection and individuals’ rights.

See: https://ico.org.uk/about-the-ico/media-centre/news-and-blogs/2024/08/action-taken-against-labour-party-for-failing-to-respond-to-requests-for-personal-information-on-time/

6th September 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

Public sector procurement: Missed targets and opportunities for SMEs
A recent report by the British Chambers of Commerce and Tussell has highlighted the ongoing challenges the public sector faces in meeting its procurement targets for small and medium-sized enterprises (SMEs).

Despite the UK government’s commitment to increasing the procurement of goods and services from SMEs, the numbers reveal a persistent shortfall. In 2023, only 20% of the total direct procurement spending in the public sector went to SMEs, amounting to £39.7 billion out of £194.8 billion.

An overview of the current situation
The report shows that while the overall value of public sector spending with SMEs has increased by 77% over the past six years, the proportion of total procurement spend directed to SMEs has remained largely unchanged. Local government fared better than central government in this regard, with 34% of its procurement spend going to SMEs, compared to a mere 2% in some individual central government departments.

The conclusion then is that SMEs continue to face significant barriers in accessing and winning public sector contracts. The complexity of procurement processes, high bid costs, and the recent dominance of large procurement frameworks have made it difficult for smaller businesses to compete with established suppliers.

Could the new Procurement Act provide an answer?
The Procurement Act, which received Royal Assent in October 2023 and is set to come into effect in October 2024, aims to address these challenges by opening up public procurement to SMEs and social enterprises. The Act introduces a more flexible and streamlined procurement system, with a focus on transparency and fairness.

Key provisions of the Procurement Act include:

• A central digital platform: This new platform will give details of all public sector tenders, making it easier for SMEs to find suitable opportunities and compete for contracts.
  
• Simplified processes: The Act aims to reduce the complexity of procurement procedures, making it less daunting for SMEs to participate. 
• Mandatory Feedback: Public bodies will be required to provide feedback to unsuccessful bidders. This will help SMEs understand how they can improve future bids. 
• National Procurement Policy Statement: This statement will guide contracting authorities to level the playing field for SMEs by removing unnecessary barriers and avoiding disproportionate contract requirements.

What proactive steps could you take?
If the Procurement Act is successful in reshaping public sector procurement, you could have a significant opportunity to increase your business. Here are some proactive steps you could take to become a public sector supplier:

1. Familiarise yourself with the Procurement Act: Understanding the changes introduced by the Act will be crucial. Keep up-to-date with developments and guidelines as they are released, and prepare to take advantage of the new digital platform once it is live. 
2. Engage with procurement frameworks: Although procurement frameworks have been seen as a barrier, they also present opportunities. You should seek to understand how these frameworks work and explore how to become part of them, potentially in partnership with other businesses. 
3. Invest in bid preparation: The quality of your bid is crucial in securing contracts. Consider investing in resources or training to improve your bidding skills, including understanding the specific requirements of public sector contracts and how to meet them. 
4. Seek feedback and adapt: Take advantage of the mandatory feedback provision under the new Act. If you make a bid that is unsuccessful, use the insights you will now get to refine your approach and increase your chances of success in future tenders. 
5. Network and collaborate: Building relationships with larger suppliers and other SMEs can lead to subcontracting opportunities or joint bids, which can be particularly beneficial when tackling larger contracts. 
6. Leverage local government opportunities: Since local governments have a higher proportion of spending with SMEs, they may offer a more accessible entry point for you. Focus on building relationships with local authorities and exploring contracts that are well suited to your business’s size and capacity.

While the public sector has fallen short of its procurement targets for SMEs, the forthcoming changes under the Procurement Act could present you with some promising opportunities.

By understanding the new legislation and taking proactive steps, you will be able to better position your business to win public sector contracts and contribute to the growth of your business in this evolving market.

See: https://www.icaew.com/insights/viewpoints-on-the-news/2024/sep-2024/sme-public-sector-procurement-spend-stalls-despite-pledges
 
Companies undermining the insolvency regime are closed down
In a recent case reported by the Insolvency Service, two connected corporate rescue firms, Atherton Corporate (UK) Ltd and Atherton Corporate Rescue Limited, have been forcibly shut down by the UK courts.

These companies, trading under the Atherton brand, claimed to offer business owners struggling with debt a legal alternative to formal insolvency procedures. However, they misled their clients by encouraging them to sell their financially distressed businesses in a way that would allow them to avoid liquidation and retain company assets without taking responsibility for the company’s debts.

The scheme was supported by five associated companies that bought these distressed businesses and appointed new directors to create distance between the original owners and any future legal actions.

Mark George, Chief Investigator at the Insolvency Service, in speaking about the case highlighted that this scheme was an attempt to help former directors and owners disassociate themselves from their company debts while retaining any assets. He said: “These actions would appear to have deliberately undermined the insolvency regime which is why the Secretary of State applied to have them and their associated companies wound-up in the public interest.”

Why this case matters: The risks of avoiding proper insolvency procedures
For business owners and company directors, this case serves as a good reminder of the importance of adhering to the correct legal procedures when considering the dissolution of a company.

Attempting to sidestep formal insolvency processes can lead to significant legal consequences, including personal liability for debts, reputational damage, and even criminal charges.

Key takeaways for company directors
If your trading company is facing financial difficulties, this case highlights some important things to remember.

1. Understand your obligations: The actions you take if your company is going insolvent are important. Therefore, get advice from a qualified professional, especially a licensed insolvency practitioner, on the correct procedures so you have the guidance you need to navigate the complexities of insolvency law. 
2. Avoid misleading schemes: Be wary of any service that promises a way to dissolve your company while avoiding your responsibilities. If it sounds too good to be true, it probably is. 
3. Follow the law: Properly dissolving a company through established legal channels ensures that all creditors are treated fairly and that you avoid personal liability. Trying to circumvent these processes can result in penalties and damage to your reputation. 
4. Seek professional advice early: If your business is struggling, oftentimes the earlier you get help the better. You may have options that would help you continue your business without the company going insolvent. It is always better to address issues head-on with the help of a professional rather than delaying and risking more severe consequences later.

If your company is experiencing financial difficulties, we realise what a stressful time this can be. Please feel free to get in touch at any time and we would be happy to help you with advice that can help you protect yourself and potentially to help your business survive.

See: https://www.gov.uk/government/news/companies-promoting-corporate-rescue-scheme-shut-down-after-undermining-insolvency-regime
 
Companies House online services to move to GOV.UK One Login
Last week, Companies House confirmed that their online services will move to the GOV.UK One Login beginning from autumn 2024.
The GOV.UK One Login is becoming an increasingly important way of accessing government digital services. It means that you only need one account, one username, and one password to access a range of government services.

The Login is already used for a number of government services, including those related to being an apprenticeship provider, finding and applying for grants, and in Wales to manage fishing permits and catch returns.

Ultimately, the GOV.UK One Login will be used to access all GOV.UK services, which eventually would include tax services. Companies House services moving across will be a major step towards this goal.

The Find and update company information service will be the first to move across, with the Webfiling service being moved at a later date.

As part of the changes being made by the Economic Crime and Corporate Transparency Act, any person who sets up, runs, or controls a company in the UK will need to verify their identity.

The GOV.UK Login will be used when Companies House implement this requirement so that users can verify their identity directly.

If you need any help with your company secretarial requirements, please just get in touch, our team will be happy to help you!

See: https://www.gov.uk/government/news/companies-house-to-join-govuk-one-login
 
Barratt Developments' profit drop sends ripples through construction and property sectors
Barratt Developments, the UK's largest housebuilder, has reported a significant decline in pre-tax profits, down by three-quarters for the year ending June 2024. This comes as the company completed just 14,000 homes, a sharp decrease from 17,000 the previous year, with forecasts suggesting even lower figures of 13,000 to 13,500 homes for the upcoming year.

For businesses in the construction and property sectors, this slowdown could be a signal of challenging times ahead. High interest rates are deterring potential buyers, while inflation continues to push up costs, creating a ripple effect across the supply chain.

If housebuilders are scaling back their operations, then construction firms, contractors, and suppliers of building materials may need to brace for a reduction in demand.

Architectural firms and estate agents and mortgage brokers may also need to look at strategies to maintain profitability, if project pipelines thin and fewer new homes enter the market.

The new Labour government’s ambitious plans to build 1.5 million homes over the next five years could counter current estimates if the suggested planning reforms, green belt adjustments, and mandatory housing targets for local authorities are effectively implemented.

While these reforms are being welcomed, analysts are suggesting that a further easing of mortgage rates is needed before activity will pick up significantly.

See: https://www.bbc.co.uk/news/articles/c8rx23jdkd5o
 
Plan 1 student loan interest rate to change to 6%
The Plan 1 student loan interest rate reduced to 6% (from 6.25%) from 30 August. This rate change applies across the UK with the Department for Education (DfE), the Welsh Government and the Department for the Economy in Northern Ireland (DfE NI) all confirming the change.

The reduction follows the Bank of England Base Rate changing to 5% earlier in August.

Those running payrolls and payroll bureaus should notice a reduction in student loan deductions for relevant employees in their September payrolls. If not, you may need to confirm that your payroll software has correctly updated.

See: https://www.gov.uk/government/news/change-to-plan-1-student-loan-interest-rate-announcement
 
Norfolk and Suffolk declared a restricted zone for bluetongue virus
The UK Chief Veterinary Officer has declared a bluetongue restricted zone across Norfolk and Suffolk following several confirmed cases of Bluetongue virus BTV3 in the region.

Since 30 August all keepers of cattle, sheep, and other ruminants and camelids in this area have to follow strict restrictions on animal and germinal product movements.

Essential movements of these animals within the Norfolk and Suffolk restricted area can be done without a licence, but they cannot be moved to another area without a specific licence.

The bluetongue virus is primarily transmitted by midge bites and doesn’t affect people. Meat and milk from infected animals are safe to eat and drink.

However, it can reduce milk yield and even be fatal to susceptible animals.

Based on current temperatures and midge activity, there is concern that there is a high risk of onward spread. Farmers are encouraged to monitor their animals frequently and report any suspicions of the disease.

To learn more about the symptoms of bluetongue and how to spot and report it, see: https://www.gov.uk/guidance/bluetongue

See: https://www.gov.uk/government/news/case-of-bluetongue-virus-btv3-confirmed-near-haddiscoe-south-norfolk

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