On March 6th The Chancellor of Exchequer, Jeremey Hunt, delivered the Spring Budget 2024 to Parliament, outlining what changes we can expect to see over the coming months from a financial point of view.

Whilst a number of changes were announced, we’re taking a look specifically at the proposed changes to Taxation and National Insurance. We explore the key points of each change and what it could mean for you.

Changes to National Insurance

As predicted, cuts to National Insurance were announced during the Spring Budget 2024.

Class 1 Changes

In the Autumn Statement, Class 1 NIC paid by those who are employed/paid through PAYE and earning between £12,750 and £50,270 was reduced from a rate of 12% to 10%. In the Spring Budget, it was announced that from 6th April 2024, the rate would be reduced by a further 2% to 8%. This could bring a maximum saving of £63 per month to employees.

Class 4 Changes

Self-employed people earning between £12,750 and £50,270 currently pay Class 4 National Insurance at a rate of 9%. Whilst it was expected that this would drop to 8% in April, it was announced that it will in fact be cut further to 6% from 6th April 2024.

For those currently paying at a rate of 9%, this means that for every £1,000 of profit in the main band, they could benefit from a tax saving of £30 – up to maximum of £1,131 per year.

Both of these changes will bring small changes to people on a personal finance level. However, businesses aren’t set to benefit from the changes as no changes to Employers NICs are to be introduced.

High Income Child Benefit Charge

Since 2013, a High Income Charge for Child Benefit in place. At the moment, those who earn over £50,000 are subjected to a charge resulting in a deduction to the amount of Child Benefit they receive. This appears as a 1% deduction for every £100 over the £50,000 income threshold. It means that when a person’s income reaches £60,000, they will no longer be entitled to Child Benefit.

However, The Chancellor announced that from 6 April 2024, the income threshold will increase to £60,000 and that the 1% charge will be applied to every £200 earnt over the threshold. This means that people will continue to be entitled to some amount of Child Benefit until they reach an income of £80,000.

Non-domicile status

The non-domicile tax status is set to be scrapped in the UK – a significant announcement made during the Spring Budget 2024.  However, the existing tax regime is intended to be phased out over a number of years, rather than brought to an immediate halt.

Under the new rules, from April 2025, people who move to the UK from abroad will not have to pay tax on the money they earn whilst overseas for the first four years of doing so. After the four years, they will need to pay tax in the same way as UK residents if they continue to live in the UK.

Those who already have non-domicile tax status are being granted a two-year transition period before they have to pay tax in the same way as those without non-domicile status. The Chancellor said that these people will be encouraged to bring their foreign income/wealth into the UK.

Holiday Lettings

Draft legislation is yet to be published, but what we know so far is that From April 2025, the Furnished Holiday Lettings tax regime will be abolished. Under the current scheme, FHL benefit from a number of tax rules, which we expect will be removed.

These are:

  1. The entire finance costs, specifically mortgage interest, can be subtracted from FHL income.
  2. When selling an FHL, there might be eligibility for business asset disposal relief, leading to a 10% capital gains tax rate.
  3. Earnings from FHLs are considered relevant for pension purposes, enabling tax-advantaged pension contributions.
  4. Under the accruals basis, capital allowances for items like furniture and fixtures can be utilized against rental income.
  5. Under the cash basis, expenses for furniture and similar items are typically deductible as property business expenses.

Many questions remain unanswered, so we are keeping a close eye on what is being announced and eagerly await the legislation being published.

Stamp Duty

From June 1st 2024, the Multiple Dwelling Relief (MDR) will be abolished. At present, it allows a relief in the Stamp Duty regime meaning  a reduction in the amount of Stamp Duty paid when two or more residential properties are purchased at the same time or as part of a linked transaction.

Capital Gains Tax

From April 6th 2024, the amount of Capital Gains Tax paid at the Higher rate for UK residential property disposals will be reduced from 28% to 24%. However, the lower rate will remain the same at 18%. This will bring significant savings to higher rate payers.

VAT

The threshold for which companies must register to charge and pay VAT is to increase from £85,000 to £90,000 from April 1, 2024.  This means that once revenue within a 12-month period reaches £90,000, the business must legally become VAT registered.

National Living Wage

As previously announced, from April 1st 2024, the National Living Wage will increase by 9.8% and will also come into effect for those aged 21 and over.

Film Tax Credit

In the Spring Budget 2024, The Chancellor announced a new UK Independent Film Tax Credit – something the film industry will welcome due to their desire to receive more support from the UK government for a long time. The credit will have a headline rate of 53% for budgets up to £15million, which must exclude distribution and marketing costs.

Some rules we are aware of are:

  • The company must have a UK director/writer/ or be certified as an official UK co-production
  • Only productions after 1 April 2024 will be eligible
  • Productions cannot claim separately under AVEC, 39% Animation, or the new Visual Effects tax relief if they are claiming this

Our Thoughts

Managing Partner, Sherad Dewedi shares his views on the changes announced in the Spring Budget 2024.

“We must be aware this Budget is likely to be the last before the next UK election, so there was no surprise that there was another cut to national insurance, despite calls for a cut to income tax. What seems to be being ignored is how employers continue to face significant increases in taxes and costs through increased corporation tax, minimum wage and whilst we welcome the benefits to employees, the lack of support in reducing Employers NI during such times feels unfair.

I do not believe people will see significant benefits of the increase in the VAT threshold of only £5,000. Nevertheless, it’s a step in the right direction.

In a landscape where taxes have increased to tackle our national debt and inflation, tax planning remains paramount and should not be ignored.”

What could this year’s Spring Budget bring?

Wednesday 6th March 2024 is a date for our diaries indeed. Why? The Chancellor, Jeremy Hunt, will deliver his 2024 Spring Budget in the House of Commons.

Whilst nothing is set in stone until the day itself, there are plenty of rumors circulating about what this year’s Spring Budget might include.

We’ve gathered speculations from news articles, industry professionals and from our internal team here at Shenward and wrapped them up into an easy-to-read blog.

What is the Spring Budget. A reminder.

It’s likely you’ve heard of it. Maybe you’ve followed it in previous years, or perhaps it’s a headline you skim past. Whatever your level of involvement, the Spring Budget is something that directly affects the UK economy. 

The Spring Budget is an opportunity for the Chancellor to provide an update to Parliament on the UK economy and announce his economic plans for 2024-25.

This announcement generally outlines plans for taxes, spending on healthcare, schools, public services and much more.

Post statement, MPs spend several days debating the Budget proposed. They are then asked to approve the tax proposals and the UK government will draw up a Finance Bill to turn the Budget proposals into law.

What’s expected in this year’s Spring Budget?

Let’s dive into the rumor mill. Here’s an overview of what the UK’s top business groups have asked for, what professionals are expecting, and what our team at Shenward are hoping to see this year:

Housing

A new mortgage scheme might be on the horizon

According to reports in the Financial Times, we might well see the introduction of 99% mortgages. This will make it easier for first-time buyers to get onto the property ladder, only needing a 1% deposit whilst the government acts as a partial backer.

Stamp duty cuts are high on the agenda

This isn’t the first year where there’s been pressure on the Chancellor to make changes to stamp duty. Many experts in the field are requesting that the levy be eradicated for older homeowners who are looking to downsize. This, in turn, could incentivise older homeowners to sell, leading to a boost in the property market.

Tax

Are major tax cuts pie in the sky?

Some news reports have suggested that Hunt could cut income tax by 2p and make reductions to National Insurance Contributions. However, with the economy now in recession, it might be unlikely that Hunt will bring these plans to the Spring Budget.

Is it time for Tourist Tax to be abolished?

The British Chamber of Commerce has requested that Tourist Tax be eliminated. This would allow international visitors to the UK to shop tax free.

Sherad Dewedi, our Managing Partneragrees with this, “the high street is losing billions in revenue from overseas visitors – who often have a comparatively stronger spending power. VAT free shopping is something which could solve this problem and give our high streets the boost they need.”

It’s been estimated that this tax costs our retail sector £1.5 billion per year!

Olivia Hudson, Senior Accountant here at Shenward would like changes to VAT in general: “I would like to see VAT being reduced on essential goods like food and energy to help with the cost-of-living crisis, especially given how much the cost of these has increases substantially in recent years.”

This could be the year for the tax threshold thaw

In April 202, thresholds for personal allowance and higher-rate income tax were frozen for four years. In Autumn 2022, the Chancellor extended this freeze to 2028. There is significant pressure on the government to end this freeze early.

Mumtaz, a Senior Accountant here at Shenward states: “I would like the personal allowance to be increased and the basic rate tax to be decreased from 20% to 19% to help with the cost-of-living crisis.” Simone Lewis, another Senior Accountant at Shenward agrees.

Some experts have suggested that the government might also amend or continue to hold thresholds for capital gains tax and dividend tax.

Our managing partner, Sherad states: “On CGT, I want to see a commitment to no changes to Business Asset Disposal Relief to enable entrepreneurs to plan for the long term. The lifetime allowance of £1m needs to be increased back to a minimum of £10m too.”

Inheritance tax removal speculations

MPs are requesting the rate of Inheritance Tax (IHT) be reduced, or even removed. Currently, this tax is charged at 40% on assets or money you leave over the tax-free threshold of £325,000.

There was much debate on this at Shenward. Saleem, one of our Assistant Accountants, is on the IHT abolishment bandwagon: “I would like to see the abolishment or scaling down of Inheritance tax in the Spring Budget for sure.

Other members of the team agreed at a minimum we should see an increase to the nil rate band which has been frozen for over 12 years.

Finance

Will the Lifetime ISA penalty be removed? 

The lifetime ISA is a tax-free account designed to help those aged 18-39 to buy their first home or save for retirement. The government pays a 25% bonus on your savings when you come to use them. However, if you want to spend the money on anything other than your first property, or if you are under the age of 60, you’ll receive a 25% penalty when you withdraw. There’s been a lot of pressure from campaigners for this fine to be scrapped.

Workplace

Employment allowances could be set to increase.

The Federation of Small Businesses has urged Hunt to increase the Employment Allowance from £5,000 to £6,500. This £1,500 increase would enable a small employer to hire four employees on the National Living Wage of £11.44 before having to pay 13.8% jobs tax, in turn supporting small businesses and enabling their growth. 

Environment

Supplying net zero incentives might be key

Reports have suggested that SMEs feel that there is a lack of direction to invest in net zero measures and that this is one of the biggest blockers in reducing their carbon footprint. The Institute of Directors research suggests that in order to incite change, the government should consider offering a lower corporation tax for organisations who have achieved net zero.

Could VAT on Electric Vehicles be reduced?

The team over at Ernst and Young have speculated that the VAT rate on new electric cars should be reduced or removed altogether to incentivise the purchase of these environmentally friendly vehicles.

Childcare

Child benefit charge alterations

In January of this year the Chancellor acknowledged that the High-Income Child Benefit Charge could be ‘unfair’. Currently, one person earning £60,000 wouldn’t receive any child benefit, while a dual-income family with two parents earning £50,000 each would get the full amount. The threshold in place may well be reviewed this Spring.

Will these speculations become a reality?

Whilst the above are all theories, the likelihood is that some, if not many, of these points will be addressed by Hunt on the 6th of March.

We’ll check back in post budget with a full run down of what is announced and how it could affect you.

And how can Shenward Accountants keep you on track?

The Economic Crime and Corporate Transparency Act has carried out some of the most significant changes to UK Company Law that Companies House has seen in years.

As business owners, you’re constantly in a race against the clock and keeping track of updates to UK regulation is just another task you don’t need. That’s where we come in. When something big happens like changes to UK Company Law, we’re on it; making sure you have access to resources covering the main changes in an easy-to-understand way and what it means for your business.

With this in mind, we’ve created a bite-sized guide to UK Company Law changes.

What’s covered?

· Improving data on registers

· Confirmation statement changes

· Changes to fees

· Identity verification

· Changes to accounts

· Protecting your information

· Limited partnerships (LPs)

· Transparency of company ownership

· Investigation, enforcement and data sharing

Improving data on the Companies House Register

What is it? Registered office addresses, statement of lawful purpose, greater registrar power, enforcements and sanction changes.

Effective from: 4 March 2024

Additional info: 

  • There’ll be new rules for registered office addresses, meaning companies must always have an ‘appropriate address’ as their registered office. PO Boxes will no longer be allowed
  • When registering a company (and on every annual confirmation statement) at Companies House, you must confirm you’re forming the company for lawful reasons.
  • Registrars will hold more power and can carry out stronger checks and challenge incorrect or inconsistent information. 
  • If businesses aren’t complying with regulations, Companies House can fine or even prosecute.  

Change to Confirmation Statements

What is it? Annually confirm your details held by Companies House are correct

Effective from: 4 March 2024

Additional info: 

  • New companies will have to provide a registered email address. Existing companies will need to provide one on their next confirmation statement. 
  • You’ll also have to confirm on your annual statement that the intended future activities of your company will be lawful.  

Changes to fees

What is it? Companies House fees are changing

Effective from: 1 May 2024

Additional info: 

There’ll be new annual and registration fees for company incorporation and registration, limited liability partnerships, overseas companies, limited partnerships, Scottish qualifying partnerships, UK Economic Interest Groupings and UK Societas, and overseas entities.

Changes to Identity verification

What is it? Anyone setting up, running, owning or controlling a company in the UK will need to verify their identity with Companies House. 

Effective from: Date to be confirmed

Additional info: 

  • For new companies, all directors and people with significant control (PSCs) will have to complete identity verification. Also, members of a limited liability partnership will need to verify. 
  • For existing companies, all directors (or equivalent) and PSCs will have a period to verify their identity. 
  • Anyone acting on behalf of a company will need to verify before they can file information with Companies House.
  • The process hasn’t entirely been determined, but Companies House have said they will organise a service to verify your identity using ID documents, such as a passport. Companies House Support will also release support services to help you complete the process. 

Changes to Accounts

What is it? New measures will improve transparency by making more financial information available to the public. 

Effective from: Date to be confirmed and more information is coming

Additional info: 

  • Companies House is modernising its filing options, moving towards filing accounts exclusively through software over the next two to three years. All companies, including those using third-party agents or accountants, must adapt to this digital format.
  • Filing options for small and micro-entity companies will also be streamlined. You’ll need to file profit and loss accounts, while the option for filing ‘abridged’ accounts will be removed. Small companies not classed as micro will also need to file a directors’ report. 
  • Companies seeking an audit exemption must provide a director’s statement on the balance sheet. You’ll need to specify the exemption being claimed and confirm the company’s qualification for it.

Protecting your information

What is it? Measures to prevent abuse of personal information held on the Companies House register are being introduced.

Effective from: Phased approach over the next two years.

Additional info: 

  • Businesses registered at Companies House will be able to suppress residential addresses, date of birth documents, signatures and business occupations. 
  • People classified as ‘at risk’ will be able to apply to have the following removed from public view – name or previous names, sensitive addresses, other details depending on the severity of the case.

Changes to limited partnerships 

What is it? LP information will be made more accessible and transparent

Effective from: Date to be confirmed

Additional info: 

  • When the measures come into force, LPs must provide additional information, such as partner details and a SIC code and file an annual confirmation statement.
  • Information must be filed through an authorised agent (like an accountant) registered with Companies House. 
  • There’ll be new powers to apply sanctions, close and restore partnerships and protect partner details.  

Transparency of company ownership

What is it? You’ll have to supply more information based on owning your company.

Effective from: Date to be confirmed

Additional info: 

  • You’ll be required to record the full names of shareholders who are individuals (or full names of corporate members and firms) in your registers. And provide a one-off complete shareholder list so Companies House can display this information in a user-friendly way.
  • Companies House will also have the right to collect and display information relating to persons with significant control (PSC) exemptions. They’ll do the same for the conditions which allow a relevant legal entity to be recorded as a PSC.

Investigation, enforcement and data sharing

What is it? Companies House will now have the power to share data with law enforcement agencies and government departments.

Effective from: Date to be confirmed

How can Accounting firms like Shenward can help you with company law changes?

Many accounting firms just like us are classed as authorised agents. This means we are registered to manage all aspects of Companies House record management for UK businesses. And, because we keep up to date with law changes, everything we do for you will ensure you remain fully compliant at all times.

Contact our professional team today if you’re looking for business support relating to Company Law changes or need help with Companies House.

You can also learn more about how an accountant can help your business here. 

As the autumn leaves fall, so does the latest fiscal roadmap for the United Kingdom, outlined in the Autumn Statement 2023. Here, we take a look at the precise changes and new rules introduced in the statement, providing an overview of how these adjustments will impact both individuals and businesses across the country.

Capital Allowances

During the Spring Budget 2023, the government opted to replace the super deduction regime with ‘full expensing,’ effective for a three-year period starting from April 1, 2023. This provision enables businesses to deduct the entire cost of qualifying plant and machinery investments from their taxable profits.

Building on this in the Autumn Statement 2023, the government has decided to make this change a permanent fixture by introducing a 100% first-year allowance for main rate assets and a 50% first-year allowance for special rate assets, including long-life assets.

Business Rates

The government is set to roll out a business rates support package totalling £4.3 billion over the next five years, aimed at providing assistance to small businesses as well as the Retail, Hospitality, and Leisure (RHL) sectors.

This initiative encompasses the extension of the 75% relief for RHL until 2024-25, capped at £110,000 in cash terms. Additionally, the small business multiplier will remain frozen for the fourth consecutive year, while the standard rate multiplier will be adjusted to align with CPI inflation.

ATED (Annual Tax on Enveloped Dwellings)

From April 1, 2024, annual charges for ATED (Annual Tax on Enveloped Dwellings) will experience a 6.7% increment, mirroring the Consumer Price Index as of September 2023. ATED is a tax in the UK levied on residential properties owned by companies, partnerships with corporate members, or collective investment schemes. This tax is applicable to dwellings meeting certain criteria and is designed to discourage the holding of high-value residential properties within corporate envelopes. The increase in annual charges aligns with the inflationary trends measured by the Consumer Price Index.

Investment Zones

The Investment Zones initiative is set to undergo an extension, doubling its duration from five to ten years. Furthermore, the expansion of this program encompasses the introduction of three new zones located in Greater Manchester, West Midlands, and East Midlands. This strategic move aims to broaden the reach and impact of the Investment Zones, fostering economic growth and development in these newly designated regions.

Research and Development

The current Research and Development Expenditure Credit (RDEC) and SME schemes are slated for consolidation, effective for expenditure incurred in accounting periods starting on or after April 1, 2024. Under the merged scheme, the notional tax rate applied to entities incurring losses will be reduced from the existing 25%, aligned with the RDEC scheme, to a new rate of 19%. This initiative seeks to streamline and enhance the effectiveness of R&D incentives.

The intensity threshold in the supplementary support for R&D-intensive loss-making SMEs will undergo a reduction also, shifting from 40% to 30%. This adjustment is expected to encompass around 5,000 additional R&D-intensive SMEs, making them eligible for the relief. Moreover, a one-year grace period will be instituted, allowing companies that fall below the 30% qualifying R&D expenditure threshold to still avail relief for the subsequent year. This change aims to broaden the scope of support and provide transitional assistance for eligible businesses.

Changes to Personal Tax and NI

National Insurance

The main rate of National Insurance (Class 1 NI) for employees is set to be cut from 12% to 10% from 6 January 2024. The Chancellor advised that this means for a person earning an average UK salary of £35,4000 per annum, a saving of £450 would be observed in 2024-25.

In addition, the NI rate for self-employed individuals (Class 4 NI) will be cut from 9% to 8%, taking effect in April 2024. The Chancellor gave an example of the savings this would bring by explaining that a self-employed person with profits of £28,200 would save an average of £350 during 2024-25.

Surprisingly, Class 2 National Insurance (paid by those self-employed who do not pay through self-assessment) is to be abolished from April 2024 – this was previously charged at £3.45 per week.

National Living Wage

From April 2024, the National Living Wage will be increased by £1.02 per hour from £10.42 to £11.44 for those aged 21 and over, meeting the criteria.

This increase will also mean benefits such as Universal Credit and other working age benefits will increase by 6.7%.

Pensions

In April, state pensions will see an 8.5% increase, and the ‘triple-lock’ mechanism, which ensures state pension rises by the highest among inflation, wage growth, or 2.5%, will be retained.

The Autumn Statement 2023 is not just a fiscal forecast but a blueprint for economic transformation. Understanding the specifics of the changes introduced is crucial for individuals and businesses alike.

As we navigate this new landscape, adaptability and strategic planning will be key to capitalising on opportunities and mitigating challenges. Contact our professional team today to find out how we can help.

The UK’s first full budget in just under a year and a half was unveiled to the public last week, causing much surprise with the level of support announced.

There’s no hiding from the fact that the rising cost of living, inflation and effects of the pandemic are putting strain on both individuals and businesses, and the Chancellor’s Budget is aiming to relieve some of this strain.

From increased childcare funding, to energy price cap extensions, people across the UK are set to benefit more from this year’s budget. Let’s explore.

Budget Key Points

Pensions and Wages

  • The current £1.07m cap on the amount workers can save in pensions throughout their lifetime before being subject to additional tax is to be abolished.

  • The current tax-free allowance for pensions pot has been frozen at £40,000 for nine years but now, the allowance will rise to £60,000.

Fuel, Alcohol and Tobacco

  • The 5p cut to duty on petrol and diesel was due to end in April, but this has been extended for another year.

  • From August, taxes on alcohol will rise in line with inflation. However, new reliefs for beer, cider and wine sold in public houses will be offered – a move to support the hospitality industry.

  • The tax on tobacco products will increase to 2% above inflation, with hand-rolling tobacco tax increasing to 6% above inflation – a move to help reduce the nation’s number of smokers, perhaps?

Energy and Power

  • The limit on household energy bills to £2,500 a year has been extended to June – an additional three months.

  • An investment of £200m is being made in a bid to make sure those using prepayment meters (around 4m households) to pay are subject to the same prices as those paying by direct debit.

  • An investment of £63m is being laid out to support leisure centres that have rising swimming pool heating costs and helping them become more energy efficient.

Benefits and Return to Work

  • From April 2024, 30 hours of free childcare per week for working parents in England will be rolled out to include children from age 1 to 4.

  • Childcare support payments for those on universal credit will now be paid in advance rather than in arrears. The £646 a month cap per child will also be raised to £951.

  • Those wishing to become childminders will receive a £600 “incentive payment”. Rules in England will also be relaxed rules to allow childminders to look after more children.

  • An investment of £63m is being made for programmes which encourage those over 50 who have retired to return to work. This will be in the form of skills camps and ‘returnships’

  • In the construction sector, immigration rules will be relaxed for five roles to help ease labour shortages.

Tax and Investments

  • The main rate of Corporation Tax for taxable profits over £250,000, will increase from 19% to 25%.

  • Companies that have profits between £50,000 and £250,000 will pay corporation tax at rate of between 19% and 25%.

  • Investments in new machinery and technology can be deducted by businesses to help lower their taxable profits.

  • 12 new Investment Zones across the UK will be funded by £80m each over the next five years which will result in tax breaks and other benefits.

Our Thoughts

We certainly welcome the support announced in the Chancellor’s March 2023 Budget. Whilst there is a notable rise in Corporation Tax and Income Tax which could add further pressure to businesses, there were some significant benefits announced which could outweigh this. For example, in the construction sector particularly, the rules have been relaxed around immigration for certain roles, thus reducing the investment in recruitment strategies and short term labour and increasing production.

Furthermore, the expensing policy for capital allowances will encourage businesses to invest in equipment that can aid efficiency – we certainly will be supporting clients with the best way to do this whilst remaining compliant.

Lastly, we believe exciting things are on the horizon given one of the 12 new investment zones will be in West Yorkshire. This investment zone will be backed by £80m over five years particularly to aid the introduction of tax reliefs, training and infrastructure. The idea is that these measures will help to level up West Yorkshire, thus creating a more evenly distributed growth for the UK economy.

Need a helping hand navigating the changes? Reach out to us at hello@shenward.com.

HMRC recently announced that to ensure all claims made on research and development (R&D) tax are legitimate, and to prevent abuse of R&D tax credit payments, it will be strengthening its extensive compliance checks.

 

In this article, we explore why.

Background

£7.4bn is the estimated total amount of R&D tax relief support claimed for the year ending March 2020, an increase of 19% from the previous year. This corresponds to £47.5bn of R&D expenditure, which is 15% higher than the previous year. These newly implemented checks will not only seek to scrutinize any and all claims, but also aid in a better understanding of the scale and nature of errors and fraud associated with these particular reliefs.

 

Despite allocation of extra resources, including the hiring of 100 supplementary compliance officers, these additional checks mean HMRC’s standard processing time will increase significantly. In lieu of this fact, HMRC has also noted that it is seeking to return to standard processing time as quickly as possible.

What is Research & Development Tax?

Research and Development reliefs are tax credit payments designed to encourage investment in innovation from UK companies. It can be claimed by a wide variety of different companies, regardless of size, who are working on innovative projects that seek to research or develop an advance in their field or resolve a particular uncertainty.

 

For the work to qualify, it is essential for it to be part of a specific project aiming to make advances in the spheres of science or technology. However, this only applies to the project itself, not to to the company as a whole. The tax credit allows a company’s R&D spend to be recovered, either as a reduction in Corporation Tax or a cash repayment. It is also possible to claim for projects that were ultimately unsuccessful.

What costs can I claim?

Starting from the date you began working on the project or resolving the uncertainty, you can claim a range of costs right up until you discover or develop an advance, or the project comes to an end.

 

Costs that qualify for R&D tax credits include:

 

  • Staff – employee costs including salaries, pension contributions and employer’s National Insurance contributions.
  • Subcontractor/freelancer costs (up to 65%).
  • Some types of software, including software license fees.
  • Payments to volunteers who took part in any clinical tests or trials.

 

You cannot claim for the costs of rent, capital expenditure, production and distribution of goods and services, or the cost of land, patents or trademarks.

How do I claim R&D Tax Relief?

You can make a claim for R&D tax credit payments up to two years after the end of the accounting period that it relates to.

 

Essentially, to claim the relief, you need to submit your enhanced expenditure into the full Company Tax Return form (CT600). Following this, you should use the online service to support your claim.

 

To calculate enhanced expenditure, start by working out costs directly attributed to research and development – remember to reduce any subcontractor or freelancer payments to 65% of the original cost. Add all costs together and multiply the result by 130% – this gives you the additional deduction to put into your tax calculations. Add this figure to the original R&D expenditure cost to get the figure for enhanced expenditure. This is what you must enter into your tax return.

 

Whilst there is no legal obligation to do so, it’s a good idea to produce an R&D technical report that not only justifies the advancements/uncertainties of the work, but also sets out the eligible expenditure being claimed on a project-by-project basis. The report should also include a short summary explaining the project, the start and end dates of the relevant accounting period, and your 10-digit company unique tax reference number. It may be helpful to speak to an R&D tax specialist when compiling any supporting documents to ensure they cover all necessary ground and to maximise your claim.

What does the ramp up in investigation mean for businesses?

The main consequence of the enhanced investigations is longer processing time for tax credit payments. Despite the standard processing time being 28 days, HMRC currently aims to pay the tax credit within 40 days. This means businesses should be prepared to wait significantly longer to either receive payment or be contacted regarding a claim.

 

The additional compliance officers working to implement these checks also means an increased level of scrutiny when inspecting R&D relief claims. However, this is unlikely to cause any problems, particularly if the claim has been checked by a qualified and experienced accountant or tax specialist, and all procedures outlined below have been properly considered.

What procedures to follow

It’s important to follow correct procedures when submitting a claim for R&D tax relief to ensure your application goes as smoothly as possible, particularly given the added level of scrupulousness that HMRC is currently fostering.

 

When putting together your claim, there are several points to consider in order to ensure it will meet the required standard. Make sure all entries are completed on the R&D section of the corporation tax return (CT600 form) and stay up to date with the latest guidance on completing the CT600 form on gov.uk.

 

Submitting any and all additional information to support the claim, including the R&D report, will help HMRC process the claim quicker, reducing any potential additional processing time. And finally, be aware that if a claim is submitted that is incorrect, inflated, or fraudulent then you may be liable to a penalty.

Get in touch

Compiling tax relief claims can be overwhelming. If you need to discuss any aspect of the claims process for R&D tax relief, or anything specifically regarding your claim, please do not hesitate to reach out to us at hello@shenward.com.

Many businesses are now back to “normal” service following 19th July being coined as ‘Freedom Day’ for people across the UK.

The government has now removed outstanding legal restrictions on social contact and life events, and all venues currently closed can safely reopen with no capacity limits.

This is great news for many businesses across the UK as they can start to recoup some of the financial losses experienced since the pandemic hit. However, for some this may still be a worrying time as they struggle to find the finances to get going again.

If you’re a Bradford business, you may be interested to find out whether Bradford council is offering financial support. The answer is, YES! They have a number of ways to support local Bradford businesses.

How is Bradford council supporting Bradford businesses?

Bradford council is offering small businesses a Small Business Rates Relief.

It is available to all businesses who occupy property with a rateable value of less than £14,999.

To qualify Bradford businesses must:

  • Have their property as the sole or main property they occupy and must have a rateable value of less than £14,999, and
  • If they occupy any additional properties, each of the additional properties must have a rateable value of less than £2,899 and the total rateable value of all of their properties must be less than £19,999, in which case the relief would be applied to the property with the highest rateable value

Also, businesses can occupy an additional property with a rateable value below £14,999, without losing entitlement to the relief on their original property, for an initial period of 12 months.

To apply, complete the small business rate relief form.

 

Bradford council is also offering those who are registered as a charity, support.

If your organisation is a registered charity or a charity that is exempt from registration or a registered community amateur sports club, it may get mandatory relief equivalent to 80% discount providing the premises are wholly or mainly occupied for charitable purposes.

Bradford Council also has the discretion to award a further 20% ‘top-up’ relief where 80% mandatory relief has already been allowed. However, this is only ever allowed in exceptional circumstances.

To apply, complete the mandatory relief form (PDF).

 

Bradford council is providing support for certain properties in rural areas.

The rural areas included must be contained in the council’s current rural settlements list which includes:

  • Eastburn
  • Harden
  • Oxenhope

The council must give 100%* relief to the following properties which are situated in a rural settlement:

  • Post Office – where it is the only Post Office in the settlement and has a rateable value of £8,500 or less
  • General store – where it is the only general store in the settlement and has a rateable value of £8,500 or less
  • All food stores – where they have a rateable value of £8,500 or less.
  • Public houses – where they are the only public house in the settlement and has a rateable value of £12,500 or less
  • Petrol station – where it is the only petrol station in the settlement and has a rateable value of £12,500 or less. How do I apply?

To apply, complete the rural rate relief form.

We hope this information has provided Bradford business owners with some help, however if you’re still unsure on how to progress with next steps for the future, we’re here to help.

 

The UK tax system is complex, there’s no denying it.  And with the introduction of various COVID relief funds of late, it’s become even harder for the everyday individual to get their heads around it.

The good news is, Tax Planning exists – and tax planning strategies for individuals can be created too.

You might be thinking “How can I possibly plan how much Tax I am going to pay?” Well, it’s possible, and we’re here to tell how.

What is Tax Planning?

Tax planning is quite simply the process of arranging your affairs – making a plan – in order to legally minimise tax liability.

You’ll notice we emphasised the word ‘legally’, and that’s because contrary to popular belief, there are several ways in which individuals can legitimately reduce the amount of tax they are or will be liable to pay.

How? By understanding the wide range of reliefs and provisions in the UK.

Why are Tax Planning strategies important for individuals?

Tax Planning strategies for individuals are important. FACT.

They enable you to take advantage of opportunities which minimise your tax bill without breaking any rules or being deceitful.

Developing a tax plan and sticking to it will mean you get to keep hold of more of your finances to either invest or spend. There are times when you are starting a new business, acquiring or disposing a business, or even property, plant & machinery, where careful planning will be required.

AGRESSIVE TAX AVOIDANCE AND TAX EVASION ARE NO GO AREAS

Aggressive Tax Avoidance

Aggressive tax avoidance has and always will be a bit of a grey area. Of course, it’s frowned upon by the government, but the final decision is always made in court and a court hearing must take place.

Why? The courts need to determine whether there is manipulation of the law in a way that doesn’t represent the government’s tax intentions. It’s worth noting that if you’re ever in a situation whereby you’re unsure of whether your actions will be classed as tax avoidance, seek professional advice. HMRC will not take it lightly if found to be avoiding tax, and you’ll end up having to pay the full amount of tax which would have been due, PLUS INTEREST.

We discourage clients against aggressive tax planning or tax avoidance schemes. We ALWAYS advise clients to avoid taking advantage of tax legislation for which it was not designed for, i.e. promoting HMRC’s anti-avoidance legislation wherever it arises.

Tax evasion

Tax evasion refers directly to an individual who deliberately avoids paying their tax. They are classed as being non-compliant with the law regarding payments, nor the policies.

As you can imagine, tax evaders deliberately break the rules to ensure that they don’t pay the correct amount of tax. Usually, it involves misrepresentation or concealment of the true state of finances to the authorities. TIP: Tax evasion is a PROSECUTABLE OFFENCE, so don’t be tempted. Failing to declare your full income or hiding tax assets just aren’t worth it.

At Shenward, we act for clients who may face HMRC inquiry under their most serious line of enquiry, Code of Practice 9. We have a successful track record in advocating clients’ positions to achieve an optimal outcome for all parties.

Tax Planning Recommendations

Now we get down to business. By now, you’ll understand that tax planning is legal, but that doesn’t mean to say you shouldn’t seek professional support. To give you an idea as to whether you could benefit from tax planning support, we’ve outlined our ideas and recommendations below.

Income tax ideas and recommendations

  1. Can you exchange part of your salary for benefits?

Exchanging part of your salary for tax free benefits is extremely valuable to those close to the higher tax threshold – between £100,000 and £150,000. Opting for tax efficient benefits can help you reduce your salary to under the threshold and is completely legal.

It’s important to note that since April 2017, the number of tax-free benefits on offer has significantly reduced, so you’ll need to ensure you’ve done your research. Examples of tax-free benefits include cycles for commuting and childcare vouchers – some even opt for onsite nurseries.

2. Can you take advantage of the dividend allowance?

Company owners paying themselves a salary can be tax efficient if they take advantage of the dividend allowance. The tax-free dividend allowance currently stands at £2,000. This means you can take £2,000 from your company every year outside of your salary without paying tax on it. Anything more than that is taxed based on your income tax band:

  • Basic Rate 7.5%
  • Higher Rate 32.5%
  • Additional Rate 38.1%

3. Can you restructure your buy to let portfolio within a marriage?

Married couples have an added advantage when it comes to income tax. Where property is involved, if one member of the couple is a basic rate taxpayer and the other a higher rate taxpayer, it would make sense to ensure that the basic rate taxpayer should receive taxable rents. However, it’s a complicated process and if not managed correctly, you can end up wiping out the savings with other taxes triggered.

4. Can you incorporate let properties into a ltd company?

In certain circumstances, it may be beneficial to form a limited company to manage the property let portfolio. There are several advantages to incorporating your portfolio into a limited company; namely enabling mortgage interest relief which is tax deductible, taking advantage of lower tax rates (corporation tax at 19% and dividend tax at 7.5%), and future planning i.e. passing down wealth to your family. Taking your non-minor children into this company and gradually reducing your own involvement/ownership can be very tax-efficient in passing down your wealth.

There are several drawbacks though, such as capital gains tax which is payable upon transfer of properties, and it is unlikely incorporation relief would be available. Transactional costs such as stamp duty, legal fees, borrowing costs are also payable. So, it is vital to plan ahead. An alternative option could be the implementation of trusts. Which would help mitigate inheritance tax upon your death. This requires a detailed assessment of your current portfolio to determine whether this is a viable option.

5. Have you got a spare room you can rent out in your house?

Yes. There is such a thing as a ‘rent a room’ relief, and it’s been around for many years. The relief allows homeowners to rent a room for a value of up to £7,500 per annum before paying tax.

Carry back ideas and recommendations

  1. Can you use past capital losses?

Capital losses are carried forward indefinitely, so make sure you’re aware of the process and speak to your accountant.

  1. Are you using your annual exemptions?

In tax year 21/22 everyone is legally allowed to realise a capital gain up to the annual exemption threshold of £12,300. Whilst it’s available during the year, if not used, it cannot be carried forward.

  1. Can you use Investors Relief?

These are available to businesses and those with shares in personal companies only and cover holdover relief and rollover relief.

  1. Are you eligible for Business Asset Disposal Relief?

Formerly known as Entrepreneurs’ Relief. Previously each individual had a lifetime limit of £10m gains at which they pay a flat rate of 10%, as opposed to 20%. Lifetime limit reduced to £1m in 2020 Budget. It is still a very lucrative relief for those eligible businessmen/women and shareholders, provided the criteria are met.

  1. Can you utilise your spouse’s annual exemption?

Transferring 50% of the property before sale to a partner would mean it was treated as though your spouse was a joint owner from when the property was first bought.

  1. Can you claim relief when you sell your home?

Usually exempt under Principal private residence rules. If you let out your previous home and live elsewhere – you can claim PPR for the time you lived there.

Inheritance tax ideas and recommendations

  1. Can you switch your assets?

Inheritance Tax is always payable on the value of your estate if it exceeds £325,000. The good news is business assets and agricultural land have IHT exemptions. It’s always worth asking yourself whether you can switch your existing assets to things such as shares in private trading companies, or even agricultural assets as an example.

  1. Why not leave your family home to a dependent?

In the tax year 21/22, there is an additional Inheritance Tax nil rate band of £175,000 when a property belonging to a deceased loved one is left to a dependent – dependents are classed as biological, step or adopted.

  1. Why not make charitable gifts in your will?

Many people naturally want to leave part of their estate to charity when they pass but doing so can also reduce the need for your family to pay Inheritance Tax. Leaving at least 10% of the net value of your estate is usually the way to go. However, where the estate value is high, a reduced rate of 36% is charged where 10% or more is left to charity.

  1. Can you take advantage of equity release plans?

If you’re aged over 55, there are a numerous equity release plans available to free up funds for multiple purposes. It works by using the value of the home to release a lump sum, which is only paid back when the homeowner goes into long term care or passes. The benefit is that the homeowner can still continue to reside in the home.

  1. When did you last update your will?

Many people make a will and then never look back over it. Regularly reviewing your will as your family and financial circumstances change will help you understand what Inheritance Tax your family may be liable to pay.

  1. Consider leaving your ISA to a spouse/civil partner

Income and capital gains received through an ISA are tax-free throughout their lifetime, but when you pass, the value is added to your estate and becomes subject to Inheritance Tax. But, if you leave the ISA to your spouse of civil partner, they can’t legally be charged Inheritance Tax – gifts between spouses/civil partners are exempt.

Contact us to talk through your tax planning strategy

Over the years, we’ve supported hundreds of people with their tax planning strategies, ensuring they are always acting legally and in line with HMRC regulations. If you’d like to find out how we can help you, please get in touch here.

Chancellor Rishi Sunak’s Budget continues emergency support for the UK economy ravaged by the Covid-19 pandemic – and the figures are eye-watering.

In the short-term, the emergency support – most notably the Coronavirus Job Retention Scheme – has been extended as the Government starts to unlock the economy over the coming months.

The Chancellor opened his battered briefcase to reveal an additional £65 billion for the Coronavirus response taking the total fiscal support over the last 12 months to a staggering £407 billion.

Government debt has risen to an historic peacetime high – forecasts show Government borrowing reaching £355 billion in 2020-21, 17% of national income – and it will have to be paid back eventually.

The start time for that pay back formed the second part of Wednesday’s Budget with largest and most profitable companies bearing the load with an increase in Corporation Tax from 19% to 25% from April 2023.

That is expected to raise £50 billion but the Chancellor has pledged it will only impact profitable businesses. What these tax rises mustn’t do, however, is discourage innovation, job creation, R&D and inward investment. That would be counter-productive to hopes of a sustained recovery.

The large companies impacted by this – those with profits over £50,000 – are also likely to have capital repayment obligations, such as loans, which are paid after Corporation Tax. What we don’t want to see is companies retrenching.

Everyone will share the debt repayment burden to some extent, however, as Income Tax will also rise in future years. Personal allowances will be frozen which will eventually lift people into higher tax brackets.

The Chancellor had little choice other than to continue to shore up the economy and finish what he’d started in supporting businesses, families and jobs.

He was buoyed by forecasts that the economy is expected to return to pre-Covid levels by the middle of next year – six months earlier than thought – but nothing is certain as we take tentative steps out of the pandemic. Unemployment fears still loom large as furlough is unwound.

What the Chancellor has done this week is leave the public in no doubt about the scale of the crisis. We’ll be paying off Coronavirus debts for decades and that, ultimately, means higher taxes for everyone.

Here are some of the main points of the Budget and what it might mean for you:

Furlough and support for the self-employed extended

The Coronavirus Job Retention Scheme – or furlough – has been extended until the end of September with the Government paying 80% of salary, though employers will be asked to put in 10% from July and 20% from August.

The Self-Employed Income Support Scheme (SEISS) continues with a fourth grant from the three months to April 2021, paid at 80%. A fifth and final grant will be based on extent of reduction in turnover. A greater than 70% reduction in turnover will enable self-employed people to claim the full 80%. A reduction of less than 70% in turnover will mean a grant of 30%.

There was good news for those who have previously missed out on SIESS because they are relatively new to self-employment. The scheme is now available to around 600,000 people with 2019-20 tax returns taken into account. Previously anyone who hadn’t filed a 2018-19 tax return and who became self-employed after April 6 2019 was ineligible.

Help for businesses

The Coronavirus Business Interruption Loan Scheme ends on March 31, 2021 and is replaced by a new Loan Recovery Scheme.

There will also be Business Restart Grant worth up to £18,000 for larger businesses such as pubs, hotels, gyms and restaurants while grants of up to £6,000 will be available to small non-essential retail shops.

The 100% Business Rates holiday will end on June 30 2021 but bills will be discounted by up to 66% for the remaining nine months of 2021-22.

VAT relief for leisure and hospitality businesses will continue with the 5% VAT rate not due to end until September 30 2021. It will then increase to 12.5% from October 1 2021 and run for another six months.

Support for homebuyers

There was good news for homebuyers as the Stamp Duty holiday is extended to June 30 2021. After that the nil rate band will be doubled from £125,000 to £250,000 until the end of September 2021. The Government also announced Government-backed 95% mortgages to help people get on the property ladder.

Corporation Tax

This was the most significant change announced by the Chancellor as the rate of Corporation Tax rises from 19% to 25% from April 2023. This will apply to larger companies with profits over £50,000.

The 19% will remain for companies with a profit of less than £50,000 – said by the Chancellor to be 70% of businesses – meaning they would be “completely unaffected” in his words.

There will be a taper for profits above £50,000 meaning only companies with profits above £250,000 would pay the full 25%, around 10% of companies. 

Income Tax and National Insurance

The Income Tax Personal Allowance will remain at £12,500 but will increase to £12,570 in April 2022 and then be frozen until 2026.

The basic rate threshold will stay at £50,000 but will increase to £50,270 in April 2022. Then it will be frozen until 2026. National Insurance remains unchanged.

National Minimum/Living Wage

The National Living Wage will increase by 2.2% from £8.72 per hour to £8.91 per hour from April 1 2021 and will be extended to 23 and 24-year-olds for the first time. The increases are lower for younger workers and are as follows: Aged 21 to 22 the increase is from £8.20ph to £8.36ph; aged 18 to 20 – £6.45ph to £6.56ph; and under 18 – £4.55ph to £4.62ph. The apprentice rate will rise from £4.15ph to £4.30ph.

Any other changes to note?

While Corporation Tax will rise in 2023 the Chancellor has offered an incentive to businesses to invest now. A ‘super deduction’ of up to 130% will be available to encourage investment in new plant and machinery.

That will be especially welcome in the infrastructure sector and it is only meant to be a ‘quick fix’ or a short-term injection to help restart the economy. The super-deduction is not available on used or second-hand assets.

Elsewhere, there’s no change on the likes of Capital Gains Tax nor Inheritance Tax.

As with every Budget the devil is in the detail and more detail will emerge in the coming days.

For expert advice, please email a member of the team at hello@shenward.com

Lockdown 3.0 came hard and fast just a day after most businesses returned to work after the Christmas and New Year break.

Businesses hoping for better times with the turn of the year were left disappointed and ‘non-essential’ shops hoping for a boost from the January sales were forced to close. Overnight the traditional ‘Happy New Year’ refrain seemed to stick in the throat somewhat.

The Government was quick to announce a new £4.6 billion package of financial help aimed at keeping businesses afloat until the Spring but for many that still won’t go far enough.

What the Government is offering is a good start but many firms are on the brink, even with furlough extended to the end of April.

There is only so long a business can sustain itself without any actual trade and the stop-start nature of the Covid-19 restrictions ramps up the pressure on businesses already under extreme stress.

Chancellor Rishi Sunak will look again at help for businesses in the Budget on March 3 but until then businesses should look closely at what is available.

Here we look at the financial support that it’s still not too late to claim.

What is the National Lockdown Grant announced on January 5 and who’s it for?

  • One-off top ups for retail, hospitality and leisure businesses who are legally required to close;
  • Those with premises with a rateable value of £15,000 or less can claim £4,000;
  • Those with rateable value between £15,000 and £51,000 can claim £6,000;
  • Larger businesses with rateable value greater than £51,000 can claim £9,000.

Coronavirus Job Retention Scheme (known as ‘furlough’)

It’s been around a while now but there are strict deadlines for claiming. Currently the Government will pay 80% of employees’ usual wages for hours they do not work up to a maximum of £2,500 per month.

The deadline for claiming for furloughed employees in December is January 14, for January it’s February 15.

The scheme is open until April 30.

Deferring VAT

VAT-registered businesses which had a VAT payment due between March 20 2020 and June 30 2020 can defer payments until March 31 2021.

Statutory Sick Pay Rebate

You can reclaim Statutory Sick Pay paid to employees off sick, self-isolating or shielding because of Coronavirus. It covers up to two weeks for eligible employees.

The company has to be UK-based and have had fewer than 250 employees since February 28 2020.

Christmas Support Payments for Pubs

If your pub was in Tier 2 or Tier 3 between December 2 and 29 2020 you may be eligible for a payment of up to £1,000.

The pub must be in England and have less than 50% in revenue from food sales.

Apply to your local authority before January 31 2021.

Business Rates Holiday for Retail, Hospitality and Leisure

Business rates have been waived for 2020-21 for retail, hospitality or leisure businesses. You should receive this automatically through your local authority if your business is eligible.

Coronavirus Business Interruption Loan Scheme

UK businesses can access loans of up to £5 million, as long as they have a turnover of less than £45 million a year.

They need to be considered viable by a lender if it was not for the pandemic and have been negatively impacted by Coronavirus.

The scheme is open until March 31 2021.

Coronavirus Bounce Back Loan

Small-medium sized enterprises and the self-employed may be able to borrow between £2,000 and £50,000, interest-free and repayment-free for the first 12 months.

Businesses must be UK-based, established before March 1 2020 and negatively impacted by Coronavirus.

The scheme is open until January 31 2021 and loans can be topped up to the maximum.

Time to Pay Service to Ease Tax Burden

HMRC offers a Time to Pay service for businesses struggling to meet their tax bill on time. Contact HMRC to see if your business is eligible.

Local Restrictions Support Grant for Businesses Forced to Close

Grants may be available from your local council if all or part of your business was closed by law at any time between August 1 and November 5 2020 or after December 2 2020.

Your business must have been in Tier 2, 3 or 4 and you can claim for each 14-day period your business was closed for. How much depends on the rateable value of your property.

Local Restrictions Support Grant for Businesses that Stayed Open

If your business was in a Tier 2 or 3 area between August 1 and November 5 2020 and stayed open you may have a claim.

You will have to show your business was negatively affected and payment is based on the rateable value of premises.

Additional Restrictions Grant

Local authorities were given extra money for businesses impacted by local restrictions.

Local authorities will decide who is eligible and for how much. Businesses which could benefit are those supplying a sector forced to close or if your business is in the events industry. It’s worth checking with your local authority about what’s available.

Self-Employment Income Support Scheme

The scheme is open for the self-employed to make a third claim – a taxable grant worth 80% of annual monthly trading profits, capped at £7,500 in total. Only those eligible for the first two rounds are eligible again.

The claim for a third grant runs from November 1 2020 to January 29 2021, and must be made on or before January 29 2021.

There’s a lot to take in but there’s more information on how to claim on the Government website www.gov.uk where you can enter in specific details about your business and see what’s available.

Just be aware of the deadlines because when it’s gone, it’s gone!