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Month: December 2022

HMRC interest rate changes

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The Bank of England’s Monetary Policy Committee (MPC) met on 15 December 2022 and voted 6-3 in favour of raising interest rates by 50 basis points to 3.5% in a move to try and continue to tackle upward pressures on inflation. This is the ninth time in a row that the MPC has increased interest rates with rates now the highest they have been since November 2008.

Consequently, the late payment interest rate applied to the main taxes and duties that HMRC charges increases by 0.5% to 6.00%.

These changes will come into effect on:

  • 26 December 2022 for quarterly instalment payments; and
  • 6 January 2023 for non-quarterly instalments payments.

The repayment interest rates applied to the main taxes and duties that HMRC pays interest will increase by 0.5% to 2.5% from 26 December 2022. The repayment rate is set at the Bank Rate minus 1%, with a 0.5% lower limit.

Source: Other Sat, 17 Dec 2022 00:00:00 +0100

Tax Diary January/February 2023

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1 January 2023 – Due date for Corporation Tax due for the year ended 31 March 2022.

19 January 2023 – PAYE and NIC deductions due for month ended 5 January 2023. (If you pay your tax electronically the due date is 22 January 2023).

19 January 2023 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2023. 

19 January 2023 – CIS tax deducted for the month ended 5 January 2023 is payable by today.

31 January 2023 – Last day to file 2021-22 self-assessment tax returns online.

31 January 2023 – Balance of self-assessment tax owing for 2021-22 due to be settled on or before today unless you have elected to extend this deadline by formal agreement with HMRC. Also due is any first payment on account for 2022-23.

1 February 2023 – Due date for corporation tax payable for the year ended 30 April 2022.

19 February 2023 – PAYE and NIC deductions due for month ended 5 February 2023. (If you pay your tax electronically the due date is 22 February 2023)

19 February 2023 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2023. 

19 February 2023 – CIS tax deducted for the month ended 5 February 2023 is payable by today.
 

Source: HM Revenue & Customs Thu, 22 Dec 2022 00:00:00 +0100

New VAT penalty regime from 2023

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A new VAT penalty regime will affect all VAT registered businesses from 1 January 2023. The changes will apply to the late submission and / or late payments of VAT returns for VAT return periods beginning on or after 1 January 2023. 

Under the new regime, there will be separate penalties for late VAT returns and late payment of VAT as well as a new methodology to the way interest is charged. This will replace the default surcharge regime and for most taxpayers should represent a fairer system.

The new system will be points-based. This means that taxpayers will incur a penalty point for each missed submission deadline. At a certain threshold of points, a financial penalty of £200 will be charged and the taxpayer will be notified. The threshold varies depending on the required submission frequency (monthly, quarterly, annual). For quarterly VAT returns, the penalty points threshold will be 4 points. The penalty points will reset to zero following a period of compliance, for quarterly returns this requires 12 months of compliance. There are also time limits after which a point cannot be levied. 

In addition, the new system will see the introduction of two new late payment penalties. A first payment penalty of 2% of the unpaid tax that remains outstanding 16-30 days after the due date. The second payment penalty increases to 4% of any unpaid tax that is 31 or more days overdue.

To help with the introduction of the new system, HMRC has confirmed that it will not be charging a first late payment penalty for the first year of the new regime (1 January – 31 December 2023) once the debt is paid in full within 30 days of your payment due date.

Late payment interest will be charged from the date a payment is overdue, until the date it is paid in full. Late payment interest is calculated as the Bank of England base rate plus 2.5%.

Source: HM Revenue & Customs Sat, 17 Dec 2022 00:00:00 +0100

Exempt company cars and fuel benefits

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Most employers and employees are aware of the additional costs of providing company cars and the tax implications they create. However, for many employees the attraction of having a company car means that in spite of any tax disadvantages, this remains a popular option. There are circumstances where it can be possible to offer employees car benefits that are exempt from tax.

These include:

Cars available for business journeys only

This rule has been the subject of much case law over the years, but it has generally been established that to qualify for VAT recovery the car must not be available for any private use.

This means that the car should only be available to staff during working hours for employment related duties or to travel to a temporary workplace. The business must also clearly tell their employees not to use the vehicle for private journeys and check that they do not.

Cars adapted for an employee with a disability

These cars are exempt if the only private use is for journeys between home and work and for travel to work-related training.

Fuel paid for by employees

The fuel benefit is removed when an employee pays for all their private fuel use or if the employer pays and the employee reimburses the amount (during the tax year).

'Pool' cars

Employers are not required to pay or report on 'pool' cars. These are cars that are shared by employees for business purposes only, and normally kept on the business premises. Employers must ensure the ‘pool’ car rules are observed.

Privately owned cars

Employers do not have to pay anything on cars that directors or employees own privately.

Source: HM Revenue & Customs Sat, 17 Dec 2022 00:00:00 +0100

Redundancy pay

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If you have been in the same job for two or more years and are made redundant you will usually be entitled to redundancy pay. The legal minimum that you are entitled to receive is known as ‘statutory redundancy pay’. There are exceptions where you are not entitled to statutory redundancy pay, for example, if your employer offers to keep you on or offers you suitable alternative work which you refuse without good reason.

The amount of statutory redundancy pay you are entitled to is dependent on your age and your length of service.

The payment is calculated based on the following:

  • Under 22 – half a week’s pay for each full year of service.
  • Aged 22 to 40 – one week’s pay for each full year of service.
  • Over 41 – one and half week’s pay for each full year of service.

Weekly pay is capped at £571, and the maximum length of service is capped at 20 years. In addition, the maximum statutory redundancy pay you can receive is capped at £17,130 in 2022-23. There are slightly higher maximums in Northern Ireland.

Of course, an employer can decide to make a higher payment, or you may be entitled to one as a result of your employment contract.

There is an overall £30,000 limit for redundancy pay which is tax free, regardless of whether this is your statutory redundancy pay or a higher pay-out from your employer.

Source: HM Revenue & Customs Sat, 17 Dec 2022 00:00:00 +0100

Vehicle benefit charges from April 2023

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The vehicle benefit charges for 2023-24 have been announced. Where employees are provided with fuel for their own private use by their employers, the car fuel benefit charge is also applicable. The fuel benefit charge is determined by reference to the CO2 rating of the car, applied to a fixed amount. The car fuel benefit charge will increase in 2023-24 to £27,800 (from £25,300). The fuel benefit is not applicable when the employee pays for all their private fuel use.

The standard benefit charge for private use of a company van will increase to £3,960 (from £3,600). A company van is defined as ‘a van made available to an employee by reason of their employment’. There is an additional van fuel benefit charge for a van with significant private use. The limit will increase in 2023-24 to £757 (from £688). If private use of the van is insignificant, then no benefit will apply.

Since 6 April 2021, the van benefit charge has been reduced to zero for vans that produce zero carbon emissions. This measure supports the governments climate change agenda by encouraging the uptake up of vans that emit zero carbon emissions.

Source: HM Revenue & Customs Sat, 17 Dec 2022 00:00:00 +0100

Are you ready for 31 January 2023?

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The deadline date to file your 2021-22 Self-Assessment tax return is fast approaching. Last year over 12.5 million taxpayers were required to complete a Self-Assessment tax return but over 2.3 million taxpayers missed the 31 January deadline.

The deadline for submitting your 2021-22 Self-Assessment tax returns online is 31 January 2023. You should also be aware that payment of any tax due should also be made by this date. This includes the payment of any balance of Self-Assessment liability for the 2021-22 plus the first payment on account due for the current 2022-23 tax year.

If you miss the filing deadline you will usually be charged a £100 fixed penalty which applies even if there is no tax to pay or if the tax due is paid on time. If you do not file and pay before 1 May 2023 then you will face additional daily penalties of £10 per day, up to a maximum of £900. If the return still remains outstanding further higher penalties will be charged after six months and again after twelve months from the filing date. There are also additional penalties for paying late that amount to 5% of the tax unpaid at 30 days, 6 months and 12 months.

If you had tax underpayments in the 2021-22 tax year you have until 30 December 2022 to file your online Self-Assessment returns in order to have the monies collected in the 2023-24 tax year starting on 6 April 2023.

We would encourage you to complete your tax return as early as possible as the filing date looms. If you are filing online for the first time you should ensure you register to use HMRC’s Self-Assessment online service. Once registered an activation code will be sent by mail. This process can take up to 10 working days. 

Source: HM Revenue & Customs Sat, 17 Dec 2022 00:00:00 +0100

Budget date 2023 announced

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The Chancellor of the Exchequer, Jeremy Hunt has confirmed, in a written statement, that the next UK Budget will take place on Wednesday, 15 March 2023. This will technically be the Chancellor’s first Budget although his Autumn Statement to the House of Commons on 17 November 2022 included many announcements more typically seen in a traditional Budget.

This means there have already been a raft of changes announced for 2023-24, so it will be interesting to see what further changes are announced as part of the Budget next Spring.

Details of all the Budget announcements will be made on a special section of the GOV.UK website which will be updated following completion of the Chancellor’s speech next March.

The Budget will be published alongside the latest forecasts from the Office for Budget Responsibility (OBR). This forecast will be in addition to that published for the Autumn Statement and fulfil the obligation for the OBR to produce at least two forecasts in a financial year, as is required by legislation.

The OBR has executive responsibility for producing the official UK economic and fiscal forecasts, evaluating the government’s performance against its fiscal targets, assessing the sustainability of and risks to the public finances and scrutinising government tax and welfare spending.

Source: HM Treasury Mon, 19 Dec 2022 00:00:00 +0100

Digitisation of tax postponed

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A statement was made by the Financial Secretary to the Treasury on 19 December 2022. It confirmed that the roll-out of Making Tax Digital for Income Tax, due to commence April 2024, is being delayed. The statement says:

Across the globe, digitalisation of tax is increasingly the norm. Modernisation of UK businesses and the tax system remains of crucial importance to the UK.

Making Tax Digital (MTD) for VAT is already demonstrating the benefits to businesses that digital ways of working can bring.

MTD for Income Tax Self-Assessment (ITSA) will follow, with businesses, self-employed individuals, and landlords keeping digital records and using MTD-compatible software to submit updates to HM Revenue and Customs.

The government understands businesses and self-employed individuals are currently facing a challenging economic environment, and that the transition to MTD for ITSA represents a significant change for taxpayers, their agents, and for HMRC.

That means it is right to take the time needed to work together to maximise those benefits of MTD for small business by implementing gradually.

The government is therefore announcing more time to prepare, so that all businesses, self-employed individuals, and landlords within scope of MTD for Income Tax, but particularly those with the smallest incomes, can adapt to the new ways of working.

The mandation of MTD for ITSA will now be introduced from April 2026, with businesses, self-employed individuals, and landlords with income over £50,000 mandated to join first.

Those with income over £30,000 will be mandated from April 2027.

The government will now review the needs of smaller businesses, and particularly those under the £30,000 threshold. This will look in detail at whether and how the MTD for ITSA service can be shaped to meet the needs of smaller businesses and the best way for them to fulfil their Income Tax obligations. Once that review is complete – and in consultation with businesses, taxpayers, agents, and others – the government will lay out the plans for any further mandation of MTD for ITSA.

Following the phased approach, the government will not extend MTD for ITSA to general partnerships in 2025. It remains committed to introducing MTD for ITSA to partnerships at a later date.

The new penalty system, harmonising late submission and late payment penalties for Income Tax Self-Assessment with those for VAT, will come into effect for taxpayers when they become mandated to join MTD. This makes penalties fairer and simpler for taxpayers. The government will introduce the new penalty system for Income Tax Self-Assessment taxpayers outside the scope of MTD after its introduction for MTD taxpayers.

The government anticipates that most taxpayers within the scope of MTD for ITSA will be able to sign-up voluntarily before they are mandated to do so. HMRC will keep this under review to ensure all taxpayers using the MTD for ITSA service receive a high-quality service.

Source: HM Government Tue, 20 Dec 2022 00:00:00 +0100

Mortgage payment support

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The Chancellor, Jeremy Hunt, recently hosted a meeting at 11 Downing Street to discuss what help may be available to support homeowners who encounter problems paying their mortgage. The meeting was attended by leaders of the UK’s major mortgage lenders, the Chair of the Financial Conduct Authority (FCA), and Martin Lewis of Money Saving Expert. The meeting was convened in light of the increase in interest rates over the last year coupled with rising inflation. 

At the meeting, mortgage lenders committed to help all their customers by:

  • enabling customers who are up to date with payments to switch to a new competitive, mortgage deal without another affordability test;
  • providing well-timed information to help customers plan ahead should their current rate be due to end;
  • offering tailored support to those who start to struggle with payments, which may vary by lender, but may include extending the term of the mortgage to make monthly payments lower, a short-term reduction in monthly payments or accepting interest-only payments for a period where appropriate; and 
  • ensuring highly trained and experienced staff are on hand to help where needed.

The government also confirmed that they would take action to make Support for Mortgage Interest easier to access and increased funding for the Money and Pensions Service to provide debt advice in England. 

The FCA in turn published a consultation on draft guidance clarifying how lenders can support borrowers impacted by the rising cost of living and will also publish more information for borrowers struggling to make their monthly mortgage payment.

Source: HM Treasury Tue, 13 Dec 2022 00:00:00 +0100

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